IRS Is Holding Millions of Tax Returns, Delaying Refunds to Taxpayers

1040 income tax form and w-2 wage statement with a federal Treasury refund check.
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The IRS is currently holding 29 million tax returns for manual processing, delaying refunds for millions of Americans, due to COVID-adjusted laws and flagging.concerns.

See: IRS Delayed Refunds Last Year for Millions of Taxpayers — Here’s How to Get Yours Faster
Find: Here’s the Average IRS Tax Refund Amount by State

On an IRS blog, National Taxpayer Advocate, Erin Collins wrote, “A combination of the high volume of 2020 tax returns requiring manual processing, the backlog of unprocessed 2019 paper tax returns, congressional mandates to issue economic impact payments (EIPs) and provide other relief to taxpayers during the pandemic, limited resources, and technology issues have contributed to more refund delays and longer refund delays than are typical in a normal filing season.”

Tax returns requiring manual processing can significantly congest the pipeline, as it requires an IRS employee to process a tax return by hand instead of the system processing it automatically.

See: Your Tax Refund Is Likely to be Late – Should You Get a Refund Advance?
Find: IRS Plans to Start $3,000 Child Tax Credit Payments in July

Returns that have been flagged for fraud detection and errors will typically need manual processing. In a news release on March 18, the IRS explained that refunds can be held for reasons including errors, the claiming of the Earned Income Tax Credit or Additional Child Tax Credit, possible identity theft or fraud or delays between the time the IRS issues the refund and the time your bank posts it to your account.

Save for Your Future

Collins noted that more than eight million individual tax returns are on hold because of stimulus rebates or because the taxpayer requested a 2019 “income look back” to calculate their Earned Income Tax Credit (EITC) or Child Tax Credit (CTC).

Given the circumstances, the best thing a taxpayer can do is ensure that all of their filing information is correct and that they have not given extraneous information. For example, CNBC reports that taxpayers sometimes file as “head of household,” which allows for larger tax deductions, when in actuality, they don’t qualify because their spouse contributes as well. This is only one example of discrepancies that can lead to significant delays.

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About the Author

Georgina Tzanetos is a former financial advisor who studied post-industrial capitalist structures at New York University. She has eight years of experience with concentrations in asset management, portfolio management, private client banking, and investment research. Georgina has written for Investopedia and WallStreetMojo. 

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