The IRS is struggling to hire, which means a massive backlog of tax returns and refunds, government watchdog says
Still waiting for your tax refund? Blame the processing backlog on an IRS staff shortage. And broken printers.
During a recent online discussion about the upcoming May 17 tax deadline, many readers submitted questions expressing frustration about returns not yet processed and refunds delayed much longer than usual.
“Any idea when the IRS may issue me my tax refund for 2019?” one taxpayer asked. “I was unable to apply that refund to my 2020 tax liability. They have kept my money for over a year but want me to send them more money for 2020. It’s unsettling.”
Another wrote: “Our return was digitally filed in late February. Last year our return was flagged for potential identity fraud, so this year we included a personal PIN. We still haven’t received our refund and are trying to figure out if it is just a delay or whether it’s likely our return was flagged again.”
“I had H&R Block prepare my taxes,” another desperate reader wrote. “The return was electronically filed on March 18 with direct deposit information. I received the state refund within 10 days, but have yet to receive the Federal. When I go to ‘Where’s My Refund,’ I am told it is being processed. How much longer do I wait before I contact the IRS, if that is even an option?”
Many just wanted to know whether it was something they did.
It’s not you. It’s the backlog and staffing shortage at the IRS and broken copiers and printers at the agency’s processing centers. In some cases, printers are just out of ink or the waste cartridge container is full.
Long before the 2021 tax season started, we knew there would be problems, because the pandemic shut down IRS offices. Then the agency had to send out tens of millions of stimulus payments.
So, it came as no surprise when an interim report about the 2021 filing season from the Treasury Inspector General for Tax Administration (TIGTA) office found that more than 8.3 million individual tax returns and transactions remained to be processed at the end of 2020, representing more than a 1,200 percent increase from a normal filing season.
Including current-year returns, as of April 30, the IRS said it had 17.1 million unprocessed individual returns in the pipeline.
Add the staffing shortage, and that’s why your refund may not have arrived yet, even if you filed electronically and indicated you wanted your money sent straight to your bank account, which in a typical year would take about three weeks.
As of March 5, the IRS had 4,434 processing positions that were vacant or filled by employees who were not working for various reasons, according to TIGTA.
“The IRS continues to be faced with significant challenges in hiring staff as well as in managing its workload as the number of employees reporting for work fluctuates from day to day as a result of the ongoing pandemic,” TIGTA acknowledged in its report.
Much of the workforce at the agency is teleworking. However, some tasks can’t be done remotely. Employees have to be on-site to receive, sort and distribute mail and to process paper returns. Many returns require manually inputting information into the IRS systems or correcting errors. And although processing centers are open, they can’t operate at full capacity, because of social distancing requirements.
The TIGTA report also highlighted a complaint from IRS staffers alleging that a lack of functioning printers and copiers has contributed to the backlog. As of March 30, IRS management estimated that 42 percent of the machines used for processing functions were unusable. Others were broken but still functioning.
Some of the machines were just out of ink. The service contract for the devices ended in September, and the replacement contractor “may not have been coming into the sites to replace the old printers due to COVID-19 concerns,” according to the TIGTA report.
The lack of working copiers has made it difficult to prepare training packages for new hires, according to TIGTA.
“Many of these new hires are not provided a computer, and hard copies of the training material are the main training resource available,” the report noted.
TIGTA said it discussed the issue with IRS management in March, and the agency said it has started replacing the broken machines.
There you have it, folks — some of the main reasons your returns are still being processed and your refunds have been delayed.
There’s not much you can do to speed up the process. Definitely don’t file a second return, which can cause an even longer delay. Don’t bother calling the IRS about the timing of your refund.
Unless the IRS is requesting documents or more information, there’s nothing you can do but wait and keep checking the “Where’s My Refund” tool at irs.gov.
If you haven’t filed yet, do your best to check and then double-check the accuracy of your return, reducing the chance it’ll end up in processing purgatory.
Reader Question of the Week
If you have a personal finance or retirement question, send it to firstname.lastname@example.org. In the subject line put “Question of the Week.” Please note that questions may be edited for clarity.
Q: Is it possible that a charitable organization does not qualify as a charity that can receive IRA-qualified charitable distributions or QCDs?
A: For those unfamiliar with this issue, let me explain.
People reaching 72 (it used to be 70½) must begin taking withdrawals from their individual retirement accounts (IRAs) and workplace retirement plans under the rule for “required minimum distributions,” or RMDs. Having to take the distribution means paying taxes on the withdrawn amount.
A qualified charitable distribution, or QCD, allows some seniors to get credit for their giving, thereby reducing their taxable income even if they don’t itemize. “Amounts distributed as a QCD can be counted toward satisfying your RMD for the year, up to $100,000,” according to Fidelity Investments. You must be at least 70½ at the time you request a QCD.
If a qualified taxpayer directly transfers funds from the IRA to a qualified charity, those dollars can count toward the RMD for the year but are not counted as income. The net effect: The taxpayer is getting a tax deduction for charitable giving without itemizing deductions.
So, what kinds of charities qualify? The IRS says the charity must be a 501(c)(3) organization, eligible to receive tax-deductible contributions. Here are some charities that do not qualify for QCDs, according to the agency.
· Private foundations
· Supporting organizations — i.e., charities carrying out exempt purposes by supporting other exempt organizations, usually other public charities
· Donor-advised funds, which public charities manage on behalf of organizations, families, or individuals
For more information, read the following columns by Allan Sloan, who writes quite a bit on this topic.
Here’s a tax break that is only available to people over 70
“Using ‘qualified charitable distributions’ rather than writing personal checks lets taxpayers subtract the donations from their taxable income — and still take the standard deduction,” Sloan points out. “This is a big deal for those of us in our 70s and older who have stopped filing itemized federal tax returns as a result of Donald Trump’s 2017 tax law, which put a $10,000 cap on federal deductions for state and local taxes, including real estate taxes.”
A tax break for retirees is back. Here’s how to use it — and what to avoid.
“This break is a fringe benefit of getting old,” Sloan wrote explaining the history behind QCDs. “For those of us who qualify to make QCDs, they’re as close to a free tax lunch as you can get these days.”
In Retirement News
Part of planning for retirement and then living on the money you’ve saved or invested for retirement is keeping up with the issues that you need to know. In this section, I’ll feature blogs, news stories, new research, surveys, and government policy changes that could affect your retirement. And if you see a news story or issue you think would help folks, let me know and I’ll check it out and then share it with your fellow newsletter subscribers.
This week, let’s stay on this topic of QCDs. Fidelity Investments has an excellent explainer on this tax strategy, including making sure the distribution check is made payable to the charity. “If a distribution check is made payable to you, the distribution would not qualify as a QCD and would be treated as taxable income,” Fidelity warns.
Read: Donating to a charity using a qualified charitable distribution (QCD)
Retirement Rants and Raves
Has the pandemic changed your retirement plans? Send your comments to email@example.com. Please include your name, city, and state. In the subject line put “Retirement Rants and Raves.” Responses may be edited for clarity.
Barbara Jarvis of Baltimore pointed out an interesting issue concerning QCDs.
“My husband and I have been donating to charities using funds from our QCDs,” she wrote. “We have checks that draw directly from those IRA funds. Some of the organizations that I’ve donated to send an acknowledgment letter with language like this: ‘Thank you for your generous gift in the amount of $xxx.xx from your Individual Retirement Account. We are writing to acknowledge that we received your gift and that it is your intention for your gift to qualify as a qualified charitable distribution from your IRA. We further warrant that no goods or services of any value were or will be transferred to you in connection with this gift.”
Jarvis wanted to rant just a little about charitable organizations unfamiliar with QCDs.
“Several of the charities I’ve donated to have never heard of them and have to be given the required information, and I’m not even sure if they meet all the criteria in the IRA QCD acknowledgment,” she wrote.
Jarvis makes a good point. Hopefully, more qualified charitable organizations will become familiar with QCDs.