The IRS deadline for filing tax returns was April 18, 2022. The majority of Americans fulfilled that deadline and are currently awaiting their tax return. This is not an unusual situation, since millions of people are still waiting for their tax returns after the IRS stated that most would be issued within 21 days.
Before the tax season had begun, the IRS was struggling to keep up with the volume of 2021 tax returns that needed to be processed. By April, that figure had risen to 15 million tax returns that the IRS had fallen behind on.
IRS Attempts To Catch up With Late Tax Refunds
The IRS is working to catch up and adjust certain items while Americans may anticipate a bit extra for their patience due to interest. The IRS made a significant improvement to the Where's My Refund feature as Americans were more dissatisfied with late refunds.
Instead of simply being able to check on the status of a refund for the current tax year, taxpayers may now check on the status of two preceding years before 2021. According to Forbes, this implies individuals may monitor the status of their 2020 and 2019 tax filings.
If Americans have not yet submitted their 2021 tax returns, they can still check the status of their 2020 and 2019 returns. This year, the average tax refund was more than $3,000, and Americans need that money now more than ever. Most individuals simply want their returns. The good news is that when they do obtain them, they will be of increased interest. Once 45 days have gone since they received the return, the IRS is legally required to pay interest on late tax returns.
This appears to be the case for many as the agency battles with a staffing shortage. This is on top of a big backlog from 2020 and coping with tax law changes. Many Americans expected that interest would be paid at a rate of 4%, but there's even better news. According to Fortune, the interest rate will climb from 4% to 5% beginning July 1.
This implies that consumers might expect to get a couple of hundred dollars in addition to their already late reimbursements. The IRS is just becoming worse as Americans get increasingly irritated while waiting for their late returns. This indicates that the agency has cut a few corners. Earlier this year, it was stated that reminders for late tax returns would no longer be sent due to inaccurate ones being sent.
People who submitted their tax returns on time were caught up in the backlog. The IRS then sent late notifications, believing their returns had not been submitted when, in reality, they had not arrived. The IRS has now revealed that it destroyed 30 million tax papers.
This was discovered during an audit of the significant backlog. The agency stated that no taxpayers will be harmed as a result of this move. This was only one of the issues discovered during the examination by the Treasury Inspector General for Tax Administration.
There was also the issue of a list of forms that could and could not be e-filed not being updated. Due to limited budget and other priorities, the IRS answered that it had not been updated since 2018, Fingerlakes1 reported.
Interest Rates For Delayed Tax Refunds
Bill Smith, the national director of tax technical services at CBIZ Inc., claims that the majority of Americans are unaware that the IRS pays interest on delayed refunds. Although it is understandable that individuals want their refunds as soon as possible, the IRS will pay four percent interest to those who have been waiting for more than one and a half months.
Because the IRS adjusts the interest rate based on inflation, the rates for late refunds may be as high as 6% by the end of current fiscal year. According to sources, the IRS paid up to 3.3 billion dollars in interest last year for delayed refunds, according to Marca.
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