Refund Delays Expected Again as IRS Falls Behind on Processing Returns

Refund Delays Expected Again as IRS Falls Behind on Processing Returns

The IRS will begin accepting and processing returns on January 24, 2022. Last year, the IRS postponed Tax Day for the second year in a row; returns could be turned in as late as May 15. The postponed Tax Days allowed the IRS to adjust to changes to the tax code. However, millions of taxpayers experienced delays in receiving their refunds, an inconvenience that is expected to occur again in 2022.

In 2021, Congress passed the American Rescue Plan (ARP) after tax season began, which led to the IRS needing to re-process returns that were completed prior to the changes to the tax code. The ARP also placed the burden of distributing Child Tax Credits on the IRS, which is already understaffed and behind schedule.

Due to additional tax credits and benefits available, roughly 77% of filers received a return in 2021. More people than usual filed returns to take advantage of the tax savings. Both of these factors led to significant refund delays for tens of millions of taxpayers. 

Per the IRS, paper returns have created a backlog from the 2020 tax year that includes "6 million unprocessed original individual returns (Forms 1040), 2.3 million unprocessed amended individual returns (Forms 1040-X), more than 2 million unprocessed employer's quarterly tax returns (Forms 941 and 941-X), and about 5 million pieces of taxpayer correspondence."

The IRS already expects delays for the 2022 tax season, especially since the tax landscape continues to be more complicated than in other years.