Taxes

It’s Tax Day, But Paper Filers Might Not See Their Refunds Until 2021

Tax Refunds Could Be Delayed Until 2021

Today (July 15) is Tax Day, and despite it coming three months later than normal due to COVID-19, several million Americans will be scrambling to get their returns (or at least their applications for extensions) out the door by midnight.

But as it turns out, taxpayers won’t be the only ones scrambling to deal with taxes in a timely manner this year. According to NPR, the Internal Revenue Service (IRS) has a tough road ahead as it attempts to process returns amid worsening pandemic conditions.

The problem, in a word, is paper.

The vast majority of Americans – 90 percent, according to the IRS’ latest tally – now file and pay their taxes digitally. Those returns don’t present much of a challenge during the pandemic.

But the problem will be dealing with that last 10 percent of taxpayers who are committed to filing and paying with paper. For many such filers, their prime objective will be getting their taxes into the mail instead of just clicking “Send” from their computers.

Those paper returns will be just a small subset of the total tax filings coming in today, but will present a big challenge for the IRS, which has sent most of its workforce home to work remotely amid COVID-19. After all, workers can’t process paper filings from home, nor can IRS employees deposit paper checks if staffers aren’t in the office to receive them.

And so, taxpayers’ paper returns have been piling up at IRS offices, according to NPR. The agency has simply lacked the staff to do anything with them. That pile is about to get much larger as procrastinators send their returns to an agency that is almost certainly not ready to receive them.

"I think that the IRS is incredibly behind," Nina Olson, a former national taxpayer advocate, told NPR. "The overflow has been so great that the IRS had to rent tractor-trailers and even … separate storage to just store the documents until the employees could come back and work through them."

So, the IRS is calling back some employees who have been working from home, designating them as “essential service providers” and giving them piles of paper that need sorting and processing.

And this isn’t the first time that’s happened: The agency called back roughly 10,000 workers in April.

“Bringing employees back to work is essential to address mission-critical needs for the nation, and the IRS is an essential component to our country’s whole-of-government approach to confronting the COVID-19 pandemic,” the agency said in a statement at the time. “To provide American taxpayers, including the most vulnerable, with the services they expect, it is essential that the IRS resumes a number of key responsibilities.”

The IRS has since brought back larger and larger shares of its workforce. The agency sought to be ready in advance of the new July 15 filing deadline, the Federal Times reports.

But many IRS workers are none too happy to return, particularly as COVID-19 cases are starting to spike in some U.S. regions. Some worry that IRS processing centers could become new “super-spreader” locations.

Keeping employees safe will mean slowly working through the backlog that built up during the pandemic period, according to Olson, the former national taxpayer advocate.

She told NPR that those who filed and paid with paper could be waiting quite a long time for the IRS to process their returns. Olson thinks the IRS might need 18 months to work through all of that paper, delaying some tax refunds. That could be bad news for low-income filers who rely on the Earned Income Tax Credit.

But union official Debbie Mullikin told NPR that she applauds the agency’s efforts to keep workers safe, even if that will mean a delay in processing paper returns. "No one wants to die to make sure somebody's tax return is accurate,” she noted.

Given the likelihood of incredibly lengthy delays, the universal advice given by both the IRS and tax professionals is for consumers to file electronically if they want their refunds to arrive before they ring in the New Year.

Calls have also increased for the IRS to simply drop the paper-filing option entirely, given the massive logistical challenges already present and the strong possibility that the pandemic might not be fully over before Tax Day 2021. For now, such a change seems unlikely for an overworked IRS that facing the possibility of a second major stimulus distribution while dealing with millions of unopened paper tax filings.

But next year? It seems possible the IRS might revisit the subject before Tax Day 2021 if the agency is still buried under piles of paperwork from Tax Day 2020.

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