July was a productive month for the IRS when it came to getting payments to taxpayers. Yet frustration continues to bubble for those who are still awaiting their refunds from tax returns that have not yet been processed.
Unemployment Adjustments
The IRS announced on July 28 that another 1.5 million taxpayers were receiving refunds averaging more than $1,600. The refunds, which involve unemployment compensation adjustments, are tied to the American Rescue Plan Act of 2021. When it became law on March 11, after many taxpayers had already filed their tax returns, among the provisions was one excluding up to $10,200 in 2020 unemployment compensation from taxable income calculations.
Through four rounds of refunds related to the unemployment compensation adjustments, more than 8.7 million refunds have been issued, totaling $10 billion. The IRS said that more tax returns are expected to be adjusted during the summer, adding that it started with the simplest tax returns and is now reviewing the more complex ones.
According to the IRS, “taxpayers will generally receive letters from the IRS within 30 days of the adjustment, informing them of what kind of adjustment was made (such as refund, payment of IRS debt payment or payment offset for other authorized debts) and the amount of the adjustment.”
More EIP Payments Made
A week earlier, the IRS announced progress on Economic Impact Payments, saying that more than 2.2 million additional payments had been sent, which moved the overall total of disbursements under the American Rescue Plan to more than 171 million, with a total value topping $400 billion.
The latest batch included payments for people who recently filed a tax return, as well as “plus-up” payments for those who got payments based on their 2019 tax returns, but were eligible for new or larger payments once their 2020 returns were processed.
Advance Child Tax Credit Payments Begin
On July 15, the IRS announced that approximately 35 million families had received the initial monthly Child Tax Credit payments, with the disbursement worth around $15 billion. The advance Child Tax Credit (ACTC) payments are slated to continue through December, with the next one set for Aug. 13. You’ll find more details about the ACTC on the IRS website.
The IRS also held events over three weekends (one in June and two in July) in various U.S. cities to help eligible families register for the ACTC payments, especially those families who are not normally required to file a tax return. The new Non-filer Sign-up Tool can help people register for both the advance Child Tax Credit and Economic Impact Payments.
A Challenging Report
The payments in July came on the heels of National Taxpayer Advocate Erin Collins’ midyear report to Congress, released at the end of June, which highlighted myriad problems the IRS had during the 2021 tax season, a time period adversely affected by the COVID-19 pandemic.
The report detailed an IRS backlog of over 35 million individual and business income tax returns that required manual processing. It also highlighted the low “Level of Service” the IRS had on its most frequently called toll-free number (the 1040 line), with only 3% of the approximately 85 million calls reaching a “telephone assistor.” As Collins pointed out in her report, when such a low percentage of calls get through to a person, “problems remain unsolved and taxpayer frustration mounts.”
Frustration Continues
And speaking of frustration, a number of readers have reached out to me to share their experience of phone folly as they sought their refunds or stimulus payments that were late in arriving.
G.K. said, “I have called the IRS and spoke with reps that give very little comfort as they say they can only answer general questions.”
B.B. said, “Every time I call the IRS I get different answers from different people; it’s like they don’t have a clue.”
D.T. said, “I can’t get a person on the phone.”
Also, the announcement of other payments being issued by the IRS can naturally make a frustrated taxpayer wonder if the agency is making headway on the backlog of tax returns. According to “IRS Operations During COVID-19: Mission-critical functions continue,” as of July 31, the IRS had “13.8 million unprocessed individual returns,” which was down from about 18 million in the first part of June.
Fixing The Problems?
In her report, Collins recommended a number of steps for the IRS to take in order to fix the various issues that arose this year, including expanding callback technology for the high-volume IRS telephone lines. Collins previously made 73 recommendations in her year-end report; the IRS agreed to implement 48 of them in full or part.
Unfortunately, while those changes may improve the performance of the IRS in the future, many people who are facing financial challenges need their funds now. As Collins noted in her report, “In the coming months, the IRS must work through its backlog of tax returns and be current in processing its correspondence while focusing on rebuilding itself to become a more efficient and taxpayer-centric organization.”
Questions?
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