IRS is holding over 29 million tax returns, delaying refunds for many poorer Americans

The Internal Revenue Service holds 29 million returns for manual processing - delaying refunds for many - due to legislative changes related to pandemics, processing errors, and fraud detection.
"As you would expect, the IRS staff are very thin in handling these tax returns manually," National Taxpayers Attorney Erin Collins wrote on her blog. "So if a taxpayer's tax return is pulled for manual processing, there will be delays."
More than 8 million individual tax returns are in suspense status due to their business cycle or Earned Income Tax Credit (EITC) or Child Tax Credit (CTC), two credits that help lower Americans' incomes.
For some returns, there was an inconsistency between the stimulus payment received from the taxpayer and the amount claimed as a claw back discount credit when it was returned. In other cases, the taxpayer used the 2019 retrospective rule to calculate their EITC or CTC and the IRS needs to review that calculation.
The Internal Revenue Service (IRS) is the revenue service of the US federal government. The government agency is an office of the Treasury. Photo: Getty Creative
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In addition, 3 million individual paper returns have to be processed for 2019 and 2020, while 7 million individual returns have errors or go through the fraud detection process. Another 11 million business and other returns are also held for manual processing.
"The IRS was unable to adapt in time"
The $ 900 billion stimulus deal that went into effect in December allowed taxpayers to use their 2019 or 2020 income to determine eligibility for EITC and CTC that year, but left the IRS insufficient Time to prepare for the change before the sign-up season started.
"Due to the late passage of the law, the IRS was unable to adjust their forms and computer systems in time before the filing season began to allow for systematic processing of tax returns where taxpayers decided to use the 2019 income," wrote Collins. "So the IRS had to create a manual process instead."
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In addition, the IRS said it would automatically correct miscalculations taxpayers make when they request their first and second stimulus reviews on their 2020 tax returns. However, this can cause delays. Taxpayers who were entitled to a stimulus check but did not receive any or not the full amount can claim this on their tax return as a refund credit.
While the IRS warned of possible delays in some refunds, the agency did not state why the EITC or CTC application would require further review. The IRS advises taxpayers to check the status of their tax returns online. However, according to Collins, this often provides insufficient information.
"The usefulness of this notice is limited," wrote Collins, "as these tools only tell taxpayers that their tax return is being processed, but do not provide details on whether they need additional information or when the refund will be released." ”
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Denitsa is a writer for Yahoo Finance and Cashay, a new personal finance website. Follow her on Twitter @denitsa_tsekova
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