The past three years have been challenging for the IRS. COVID-19 shutdowns, last-minute tax law changes and staffing issues led to a notorious backlog of returns to process.
National Taxpayer Advocate Erin M. Collins’ 2022 annual report to Congress, released on Jan. 11, 2023, reported that the IRS started 2022 with a backlog of 4.7 million unprocessed individual paper returns.
Meanwhile, taxpayers with questions had a hard time getting answers: The IRS received 173 million calls during 2022 and only 13% got through to an employee. Those who got through waited an average of 29 minutes before the call began, she said. But there is good news on the horizon.
There Is Light at the End of the Tunnel
As of Dec. 30, 2022, the IRS had 2.04 million unprocessed individual returns it received in 2022, including 1.6 million that require error correction or other special handling, and 440,000 paper returns waiting to be reviewed and processed.
But the IRS backlog situation has been improving.
“We have begun to see the light at the end of the tunnel,” Collins told Congress. The Inflation Reduction Act, signed on Aug. 16, 2022, includes nearly $80 billion in IRS funding to help with taxpayer services, enforcement, operations support and business systems modernization.
The IRS used some of the money to hire 5,000 new customer service representatives to answer phones and provide other services and it’s also improving its automated systems and adding more staff to the taxpayer assistance centers.
“We are encouraged that the IRS is continuing to take measures to reduce the backlog to pre-pandemic levels,” Peter Mills, senior manager for tax policy & advocacy with the American Institute of CPAs, says.
“All indications are service levels will improve during the 2023 filing season; however, due to the previous years’ challenges, we remain concerned. The AICPA continues to urge the IRS to focus on improving service levels and modernization to help reduce this backlog. Adequate staffing, training and IT infrastructure will be critical to these efforts,” he says.
While the IRS works on improving the filing process, there are steps you can take to help avoid delays, and keep in mind that the bureau has to pay interest on the money you’re due if you don’t receive your refund within 45 days of the filing deadline. Here’s how get your refund faster:
File Electronically and Opt For Direct Deposit
Filing your return electronically is the No. 1 thing you can do to speed up the process. The IRS estimates that the average taxpayer will receive their refund within 21 days if they file electronically and have the refund deposited directly into their bank account.
The IRS has to review paper returns manually, which typically delayed refunds for six months or longer in 2022, according to the Taxpayer Advocate’s report.
“The e-filing system works so well because taxpayers and their preparers are doing all of the key-punching that fell to the IRS employees in the past,” Mary Kay Foss, certified public accountant in Walnut Creek, California, says.
You can file electronically using tax software or an online program. If your income was $73,000 or less in 2022, you may be able to file your taxes through IRS Free File, a program in which online tax prep companies partner with the IRS to provide free services. See the IRS Free File page for more information.
To have your refund deposited directly into your bank account, you’ll need to provide your bank account and routing numbers when you file your return.
You can also split your refund among financial accounts — including checking, savings, individual retirement accounts, eligible health savings accounts or Coverdell education savings accounts. Or, you can use at least part of your refund to buy up to $5,000 in series I savings bonds. Another option is to have your refund applied to your 2023 estimated tax.
“Always double-check the bank information where your refund is going to be deposited,” Trish Evenstad, enrolled agent with Evenstad Tax & Financial Services Inc. in Westby, Wisconsin, says. Processing can be delayed if the name on the account isn’t the same as the name on the tax return.
[See: Smart Ways to Spend Your Tax Refund.]
Review Your Return for Mistakes
Fact-check your return before you send it. Check your math, make sure all Social Security numbers are correct and don’t forget to sign the return.
“Common errors will delay processing,” CPA Foss says.
“Many errors can be prevented if one spouse reads all the information on the return before the preparing spouse submits it. That’s where a professional preparer helps. They’ll have systems to find those annoying typos,” she says.
The IRS may correct small math errors and send you a notice of the change. For larger errors, you may need to respond to an IRS letter asking for more information.
“Review the return and all schedules line-by-line for accuracy and completeness,” Michael Trank, CPA with Wertz & Company in Irvine, California, says.
“For me, it is useful to take a second fresh look the next day. Also, compare the return to the prior year for any unusual variances or omissions,” he says.
Some details of your 2022 return will be different from 2021 — for example, the charitable deduction for people who don’t itemize disappeared in 2022 and the supersized dependent care credit returned to its usual level — but you can still see if the numbers on your return are similar to previous years, which can help you identify if you’ve missed a deduction you usually claim.
[Read: Tax Write-Offs You Shouldn’t Overlook.]
Also, make sure you check everyone’s names on the return.
“Make sure to use your full legal name on your tax returns and at work so the documents match,” Evenstad says. People who were newly married in 2022 should ensure the names on their tax returns are the same as what’s on their current Social Security cards, Trank says.
And if you have grown kids, coordinate with them before either of you file a return. Foss saw problems in the past when college kids filed their own return and claimed themselves as an exemption without notifying their parents.
“Usually, the parents’ return was filed second and the return would be rejected,” she says. Processing will also be delayed if both the parent and child claim an education tax credit for the same expenses, she says.
[Read: A Guide to Educational Tax Credits and Deductions.]
Match the Forms the IRS Receives
You’re not the only one receiving W-2, 1099 and other forms from employers, financial institutions and others. The IRS gets a copy, too.
“A missing or incorrect W-2 form could cause a delay,” Trank says.
If the numbers on your return don’t match the information the IRS receives, it will put your return aside for review. You may receive a notice from the IRS showing the difference between what you reported on the tax return vs. what the issuer reported, Trank says.
You should receive most of the forms by the end of January, and brokerage firms have until mid-February to send some 1099s. Wait until you receive all your key forms to file your return.
Some forms tend to come late, such as the Schedule K-1 from a partnership, S corporation or trust, Foss says. If you haven’t received the information by the filing deadline, which is April 18, 2023, for 2022 returns, you can file an extension to delay your deadline until Oct. 16, 2023.
But even though the extension can delay your filing deadline by six months, any money you owe is still due by April 18. Foss recommends asking the Schedule K-1 issuer to estimate the income it will report so you can roughly calculate any payment due in time for the April deadline.
Get Faster Tax Help
The sooner you file your return, the earlier you should get your refund — and the less likely an identity thief will claim the money first. But many people wait to file because they have tax questions. And although the IRS increasing staffing will help reduce the long wait to get questions answered, there are alternative ways to get help.
See the IRS Let us Help You page for information on how to track down information on the website and various ways to get your questions answered. For example, the best way to check the status of your refund is by using the Where’s My Refund? tool, which enables you to check on your refund within 24 hours of filing electronically — or four weeks after filing a paper return.
You’ll need to input your Social Security number, filing status and exact refund amount you are due. The Taxpayer Advocate Service website also offers helpful filing information.
In addition, you can work with Volunteer Income Tax Assistance and Tax Counseling for the Elderly programs, which are staffed by IRS-certified volunteers and offer free tax help for filing returns. The VITA program, which has been helping taxpayers for more than 50 years, is generally for those who make $60,000 or less, have disabilities or limited English-speaking skills. The TCE program typically offers free tax help to those 60 and older. See the IRS locator tool to find a site near you.
Be careful with how you get help. Tax time is also prime time for scam artists, who prey upon people’s desire to get their refund quickly and end up stealing your money or your identity.
The IRS will not call or e-mail you asking for your personal information, such as your bank account, credit card or Social Security number. You can find out more about when and how the IRS may contact you at IRS.gov. You can also find out more about tax preparers’ credentials by visiting the IRS Directory of Federal Tax Return Preparers.
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How to Avoid IRS Tax Refund Delays in 2023 originally appeared on usnews.com
Update 02/08/23: This story was published at an earlier date and has been updated with new information.
