The IRS got off to a slow start to 2021, with a late announcement of a late start to tax season, and the pattern has continued since.
The reasons are perhaps understandable, in that there have been two new rounds of stimulus checks to distribute at short notice, and continued disruption due to the pandemic. On the other hand, the pandemic has been around for over a year now, and distributing stimulus checks employs a system set up a year ago.
In this article we look at some of the issues and delays Americans, including expats, are experiencing with the IRS in 2021, the reasons for them, and what (if anything) you can do about them.
Delays to refunds in 2021
The IRS claims that it is processing 90% of 2020 tax returns within three weeks, however there are an unprecedented number of returns being flagged for manual processing this year. While stimulus checks were originally issued based on 2019 (and in some cases 2018) incomes, all three rounds were technically tax refunds for the 2020 tax year, meaning many more returns need checking in case of an income discrepancy that could mean an additional stimulus sum may need to be paid. The knock-on effect of processing more returns manually is that many Americans are experiencing delays receiving refunds.
Furthermore, the stimulus legislation passed in December 2020 contained some changes to eligibility for the Additional Child Tax Credit and the Earned income Tax Credit applied to the 2020 tax year, depriving the IRS of time to apply the changes to the computer systems, meaning yet more manual reviews.
Allegedly the IRS has a backlog of around 30 million tax returns to review currently.
“As the U.S. economy recovers from the disruption and damage of Covid-19, the Internal Revenue Service is struggling through a filing season unlike any other in history.” – Forbes
Bearing in mind too that it’s the first full tax season the IRS is dealing with in the pandemic, with many staff still working remotely, the reasons for the delays in processing and issuing refunds become clearer.
Unfortunately, there’s not much that you can do if you’re waiting for a refund. The delay may take up to ten weeks. The IRS advises that you don’t call them (see next section), but just to be patient.
Not answering the phone
The reason that the IRS advises not to call them is because, besides all of the already mentioned issues, they are also short staffed, and this means it’s very hard to get through to them.
Forbes recently reported that the IRS is answering just 7% of calls to its account management lines, and just 2% of calls to its 1040 helpline. There is also a 300% increase in calls being made to them this year.
Two of the main reasons that Americans, including expats, are trying to call the IRS, are to ask why they haven’t received their refund yet, or to ask why they haven’t received the full amounts of stimulus payments that they believe they are owed.
In neither case will calling speed up the process at this time. The most likely reason a refund hasn’t been received is systematic delays, while the full and final stimulus payment amount will be calculated and paid automatically when a 2020 tax return has been filed and processed. Unfortunately, patience is the only course of action at the moment.
Seek advice and catch up
All Americans, including those living abroad, have to file a US tax return if their global income exceeds IRS thresholds, which start at just $5 for Americans who are married to filing separately from a foreigner.
Filing from abroad involves filing additional forms to claim credits and exclusions for expats, and often foreign currency conversions and reporting foreign bank accounts, investments and business interests, too. It’s always beneficial to seek advice from an expat tax specialist to ensure you fulfil all your reporting obligations and realize your best outcome.
Americans who have been living abroad but not filing US taxes can often catch up under an IRS amnesty program known as the Streamlined Procedure.