Faster Tax Refunds and Processing Times: What You Need to Know as IRS Tackles Backlog
The Internal Revenue Service (IRS) has been hard at work, making progress on clearing its inventory of tax returns, payments, refunds, and correspondence. While improvements have been made, there are still some sectors experiencing delays. Here’s an update on the current status.
A Ray of Hope
Processed Returns The good news is that the IRS has successfully processed all paper and electronic individual returns received before April 2023, with mail being opened within normal time frames. This means that returns for the tax year 2021 or earlier, without errors or further review required, have been efficiently handled.
The Unprocessed Lot
What’s Left As of July 8, 2023, the IRS still had 2.42 million unprocessed individual returns. This includes tax year 2022 returns, 2021 returns needing review or correction, and late-filed prior year returns. Among these, 1.6 million returns require error correction or special handling, and 820,000 are paper returns awaiting review and processing. In such cases, the IRS takes more than 21 days to issue the related refund.
Current Year Returns
Prioritizing Refunds For this year’s individual tax returns, the IRS prioritizes processing those that are due for refunds. Returns reflecting tax payments owed are processed last, though the IRS is always eager to receive payments. Payments mailed with tax returns are separated upon receipt and promptly deposited.
When Errors Come into Play Returns with errors requiring manual review will be processed in the order they were received. Some returns may need a second look, and if the IRS requires more information or verification, a letter will be sent. This may take over 120 days, depending on your response time and the IRS’s processing capacity.
The Waiting Game
Refunds Typically, the IRS issues most refunds in less than 21 days. However, if you filed your return on paper and expect a refund, the processing time may extend to four weeks or more. For specific refund status, you can check “Where’s My Refund?” The information becomes available 24 hours after e-filing a tax year 2022 return, three or four days after e-filing a tax year 2020 or 2021 return, and four weeks after filing a paper return.
Amended Returns
A Patience-Testing Process As of July 8, 2023, the IRS had 1.29 million unprocessed amended individual tax returns, indicating an increase compared to previous years. The agency processes these returns in the order they were received, and the current wait time can extend beyond 20 weeks. Filing the same return multiple times will only add to the backlog, so be sure to check “Where’s My Amended Return?” for status updates.
Employer’s Quarterly Federal Tax Return (Forms 941) As of July 13, 2023, the IRS had 266,000 unprocessed Forms 941, the Employer’s Quarterly Federal Tax Return, and they process them based on the order received.
Tax-Exempt Applications
A Significant Wait Each year, the IRS receives over 95,000 applications for tax-exempt status, leading to substantial review times. As of now, some applications submitted after specific dates have not yet been assigned to specialists.
ITIN Processing For Forms W-7
The Application for IRS Individual Taxpayer Identification Number, received in April 2023, the current processing time is approximately 12 weeks. You will be notified once your ITIN is assigned or if additional information is required. The associated tax return will then proceed for processing.
Forms 2848 and 8821: A Manual Process
The IRS is processing third-party authorizations (Forms 2848 and Forms 8821) in the order received. However, they cannot provide a specific timeframe for completion. The Submit Forms 2848 and 8821 Online tool allows online uploads but still requires manual processing.
Keep these updates in mind while navigating tax matters, and remember that resubmitting returns without a valid reason may confuse the IRS further. Stay informed and utilize the available tools to track your refund status and other important updates.