According to the Taxpayer Advocate Service’s 2020 annual Congressional report, the Internal Revenue Service (IRS) made several critical missteps when distributing the first round of stimulus checks at the pandemic’s onset. These mistakes resulted in insufficient payments, late tax refunds, and more.
The repercussions could be seen once more this year as the 2020 tax season begins and the government issues more stimulus checks to eligible Americans.
“During 2020, the COVID-19 pandemic affected almost all facets of our lives, and U.S. tax administration was no exception,” National Taxpayer Advocate Erin Collins wrote in the report. “IRS personnel who open and process tax returns and answer the toll-free telephone lines had to follow social distancing guidelines and stay-at-home orders, limiting their ability to assist taxpayers.”
Collins noted that 2020 was made all the more difficult by the IRS “stretching its resources even further” by distributing two separate direct payments. The Taxpayer Advocate Service is an independent IRS watchdog group that advocates for taxpayers’ rights.
Yahoo Money reached out to the IRS for comment but didn’t receive an immediate response.
The CARES Act provided direct payments to nearly 160 million Americans. However, the Taxpayer Advocate Service report found that “millions of eligible individuals did not receive some or all” of the amount they qualified for.
At first, the IRS stated that it would not fix stimulus check errors last year, but afterward promised to resolve a few issues — “mostly those it could fix via automation,” according to the report.
Even so, a large portion of cases are still open, which means qualifying taxpayers must wait for the rest of the benefit to arrive with their 2021 tax refund. Individuals can also claim the $600 payment distributed in December on their taxes if they qualify but never received a payment or received an incorrect amount.
“The IRS did not create programming to allow manual adjustments of individual accounts until September,” Collins continued, “and even then, only a limited number of issues could be manually corrected.”
Late Tax Refunds
Millions of people are encountering roadblocks in receiving their 2020 tax refunds due to bottlenecks and fraud detection screenings, researchers discovered. These backlogs occurred because of the “IRS’s inability to timely open and process the roughly 16 million paper tax returns,” the report reads.
As of December 31, the agency had more than 7 million unprocessed tax returns. As of November 24, 2020, it had more than 2.3 million unprocessed business returns. Collins noted that “The majority of these taxpayers likely were entitled to refunds, yet they had to wait many months longer than usual to receive them.”
Every single tax return that claimed missing stimulus money must go through several screenings designed to catch identity theft or fraudulent income. More than half of the forms stuck in this stage of the process have eventually been found to be authentic, the report concluded.
Generally, the IRS alerts taxpayers about a locked refund in a letter sent by snail mail, which further slows the process. Every one in four returns marked for income certification saw a 56-day-plus delay in issuing a refund. For almost one in five, the IRS took more than four months to send refunds.
Besides these issues, the IRS also encountered other problems. For example, IRS agents answered just one in four out of more than 100 million phone calls from Americans in 2020. An estimated one in four were sent to automated responses, while one in three callers hung up.
Collins wrote, “Put differently, IRS employees did not answer more than 75 million telephone calls from taxpayers seeking help in complying with their tax obligations.”
Additionally, the IRS issued late notices to millions of people. These notifications included responses or deadlines that already lapsed. This occurred because the agency could automatically print the letters, but it didn’t have the manpower to mail each one. Instead, the IRS added them to the 1.8 million letters informing recipients they have more time to answer — a move that led to more “concussion and anxiety,” Collins noted.
The Taxpayer Advocate Service report explained that the IRS could have developed a weekly “COVID-19 Dashboard” to update Americans about these obstacles. “For much of the year, relatively limited information was released,” Collins said, “and comments made by IRS officials often were incomplete or misleading.”
2021 Expected To Be Just As Challenging
The IRS will likely contend with many of the same issues it encountered last year. According to Yahoo Money, the agency’s processing facilities are continuing to practice social distancing, which will continue to slow the process and contribute to the bottleneck of returns.
The second round of direct payments — let alone a possible third — will only contribute to the complications facing the IRS as this year’s tax season begins.
“The challenges created by the COVID-19 pandemic will continue through the 2021 filing season and possibly for months longer, affecting both the IRS and taxpayers,” Collins stated in the report. “I expect the IRS has learned from the 2020 experience and will improve on its performance in the coming months.”
- Tsekova, Denitsa. “Stimulus Check Confusion and Delayed Tax Refunds: IRS Watchdog Details Failures.” Yahoo!, Yahoo!, 13 Jan. 2021, money.yahoo.com/watchdog-report-stimulus-checks-tax-refunds-irs-missteps-165139090.html.