4 Reasons to explain what is slowing down tax refunds

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These are four reasons you could still be waiting on a tax refund. An example of a complicated return with stimulus credit (#4) is detailed below.

Backlog of Tax Returns

The IRS is still processing 20 million+ tax returns that were left in the dust when the IRS shutdown the agency in under 2 weeks due to pandemic.

Aging Computer Systems

The IRS still relies on “legacy” systems, some 25 years old.

Lack of Resources

The IRS has endured 8 years of 20% budget cuts. Staffing remains an issue and there are still people working from home.

Complicated Tax Returns

There are any number of reasons a tax return can be complicated. For example, thing became complicated and were a hurdle in recent years for the reconciliation of Economic Income Payments (fancy way of saying stimulus) with claims for the Recovery Rebate Credit RRC (fancy way of saying you didn’t get a stimulus payment.)

Our sources say there was a bottleneck in reconciling some stimulus payments because of a misunderstanding in how to report (either by the taxpayer or by the preparer) the receipt of stimulus payments.

Complicated Example: Taxpayers with dependents who also file tax returns.

Despite correctly answering the question “Did you receive a stimulus….?”, the answer could be a problem for taxpayers with dependents who also file tax returns.

If the dependent said “no”, although true they didn’t receive the stimulus, to the IRS that meant the dependent is claiming the RRC and it is possible that was calculated as part of the refund. Because this would lead to an overpayment of stimulus, it doesn’t reconcile.