7 Reasons the IRS May Still Owe You Money
In 2022, Tax Day was moved back from the standard date of April 15 to April 18 to accommodate a holiday. However, many people needed more time and filed for extensions, which all taxpayers are entitled to do provided they submit their requests to the IRS before Tax Day.
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Those to whom the IRS granted extensions bought themselves six extra months to get their affairs in order — and they’re quickly running out of time.
If the IRS approved your request for a six-month extension from the original deadline of April 18, you might have already filed. If you did, you probably got your refund within three weeks, as the IRS processes most refunds within 21 days.
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But if you’re a straggler who still hasn’t filed despite the extension deadline being less than 10 days away, your procrastination could be keeping money out of your checking account.
When the IRS processes your return, it might very well be that the agency owes you a refund, but you won’t know until you file.
Even when the IRS grants extensions, you’re still required to pay your tax bill by the original deadline, which this year was April 18. Estimating a tax bill is a better-safe-than-sorry situation — when dealing with the IRS, it’s always better to overpay and get money back than underpay and get a bill with penalties and interest.
If you requested an extension and paid your estimated bill, you might be pleasantly surprised to learn upon filing that you overpaid. If that’s the case, the IRS will be sending the difference back your way.
By mid-July, the IRS had processed 97% of the returns it had received. Even so, the agency was still sorting through a backlog of 6.2 million unprocessed individual returns as of Sept. 23. That includes returns from tax year 2021 and late-filed returns from previous years.
If you’re still waiting, it could be that the overburdened, underfunded agency simply hasn’t gotten to your returns yet.
Of the 6.2 million returns the IRS is still sorting through, 1.6 million contained errors requiring correction or other “special handling.”
In most cases, this is because a return:
- Has a mistake
- Is missing information
- Involves suspected identity theft or fraud
If you haven’t heard anything, don’t panic. The IRS will fix the errors if it can and will contact you only if the agency needs more information or needs to verify information it already has. In those cases, the IRS says, “The resolution of these issues could take more than 120 days depending on how quickly and accurately you respond, and how quickly we can complete the processing of your return.”
Once those errors are corrected, the IRS could end up owing you money.
The IRS processes returns that don’t contain errors or require further review in the order that they’re received — but only until March. If you submitted a paper return by snail mail after that, you probably got bumped to the back of the line.
A large majority of the 6.2 million returns the IRS is still sifting through — 4.6 million — are paper returns waiting to be reviewed and processed.
If yours is among that heap, you might very well be getting a refund that hasn’t been processed yet. Next year, file early if you insist on putting pen to paper — or better yet, join the e-filing revolution that began in 1986 and submit your returns online.
If you filed an amended return using Form 1040-X, you might still have some good news coming your way if you overpaid or are owed credits for the year you’re amending — but it might take a while.
As of Sept. 24, the IRS was still facing a backlog of 1.5 million amended returns. They’re processed in the order they’re received, but the IRS warns that it could take up to 20 weeks to get to them.
The IRS processes returns with refunds due first because, if the agency keeps you waiting too long, it has to pay you your refund with interest.
The IRS has 45 days to process refunds before interest begins to accrue. On Oct. 1, the rate — which compounds daily — jumped to 6% from 5%, which it had been paying for the quarter starting July 1.
If you received a refund beyond 45 days after you submitted an error-free return, you might have an interest payment coming not far behind.
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