IRS still hasn't processed millions of 2019 tax returns

Christanine Brodis gathered her tax paperwork in February including a 1099-G for state unemployment compensation and a W2-G for some gambling winnings at MGM Grand Detroit, the only bright spot in a money-losing 2020. But she’s looking at taxable income now.

Brodis, 48, sent her forms to a tax preparer by encrypted email, talked on the phone in her living room on a cold Saturday morning and had her 1040 prepared remotely as part of covid-19 precautions taken now through the Accounting Aid Society in metro Detroit.

Now she waits and wonders.

The Detroiter, who has been out of work during the pandemic, is expecting a tax refund of more than $4,500 for 2020 via direct deposit.

She’s hoping she’ll see that money sooner than an anticipated refund for her 2019 income tax return, which is still hanging in limbo somewhere.

“It’s been over a year now,” Brodis said. “They accepted my taxes last year on Feb. 7. It doesn’t seem like it should go that slowly, but there’s nothing I can do to speed it up.”

The covid-19 pandemic turned the tax season upside down last year, and even now millions of people are still dealing with the aftermath in 2021.

The Internal Revenue Service said in mid-February that it had yet to process 6.7 million individual income tax returns for 2019, based on data through Jan. 30.

Getting those returns processed — and any refunds involved in hand — may require additional review, dealing with corrections and addressing some ID theft-related problems where the IRS will need to work with taxpayers, according to the IRS.

Most 2019 federal income tax returns have been processed. But the lingering problems are significant, enough that the House Ways and Means Committee is asking the IRS for answers and calling for the IRS to extend the tax return deadline for 2020 tax returns beyond April 15.

“One year later, another unique filing season is underway, and many of these same pandemic-related difficulties and challenges persist for taxpayers, practitioners, and the IRS,” according to a letter dated Feb. 18 signed by U.S. Rep. Bill Pascrell Jr. (D-New Jersey), the chairman of the House Ways and Means subcommittee on oversight and others on the subcommittee. The letter was addressed to IRS Commissioner Charles Rettig.

Nobody ever wants to wait up to a year for a federal income tax refund. It’s money that many people often use to cover holiday bills, winter utilities and even going to the doctor after delaying visits because they don’t have the money.

But the backdrop of economic uncertainty surrounding the pandemic makes things even more troublesome for those who lost a job and had expected extra tax refund cash many months ago.

Some who faced headaches with those tax refunds said they had trouble getting their stimulus cash, too.

Errant tax notices trigger frustration

The confusion has continued into 2021. In early February, the IRS sent out notices to about 260,000 taxpayers nationwide that claimed that the people had not yet filed their 2019 tax return.

One small problem? Many of those taxpayers did file their 2019 tax returns promptly last year, but the IRS has not yet processed them.

Oops. Later, the IRS issued a statement that essentially said don’t panic or respond to the CP59 notice, if you did file a 2019 return.

“Due to pandemic related shutdowns, the IRS has not completed processing all 2019 returns at this time,” the IRS noted in its statement.

“Therefore, the CP59 notices should not have been sent because some portion of the recipients may actually have filed a return that is still being processed.”

“There is no need to call or respond to the CP59 notice because the IRS continues to process 2019 tax returns as quickly as possible. The IRS regrets any confusion caused by this mailing.”

Naturally, many taxpayers who received these notices were nervous, according to Lori Moore, principal in the wealth management tax department for Plante Moran in Southfield, Mich.

Her clients, she said, knew they filed a 2019 federal income tax return last year back in April or earlier, so it was unsettling to hear otherwise.

Moore said the notices are automatically generated by the IRS systems, but taxpayers would want to consult with their tax advisers to confirm if their notice was sent in error, as many returns were sent but not processed.

“They’re in the IRS system in some way, shape or form,” Moore said.

The IRS, like many businesses, had to quickly figure out ways to work remotely during the pandemic. But many things didn’t go very smoothly.

“I do think covid-19 has had a huge impact on 2019 returns,” Moore said.

IRS processing centers shut down early in the pandemic last year. Piles of paperwork sat untouched for months in truck trailers. The IRS last year acknowledged delays involving the filing of paper returns as a result of what it calls “covid-19 mail processing delays.”

The delays aren’t just limited to paper returns, though, as tax preparers and taxpayers told the Free Press that they e-filed and still couldn’t get their situations resolved last year, either.

Some who filed electronically voiced frustration about their missing tax refunds from their 2019 tax returns, too.

“They’re calling, like ‘Hey, can you check on the status of my refund?’ ” said Antonio Brown, a CPA in Flint, Mich., whose firm prepares about 300 tax returns a year.

Brown, who is chief executive officer of John L Financial Services, said one client is due a federal income tax refund for the 2019 return of around $2,300 and another married couple is waiting for nearly $6,500 in a federal income tax refund.

“I’ve never experienced someone waiting 10 to 11 months for a refund from the IRS, and I’ve been doing this for a while,” said Brown, who has been preparing taxes for 16 years and is a member of the Michigan Association of CPAs.

The taxpayer who was owed $2,300 had e-filed but later received a letter in November requesting that he authenticate his identity, Brown said.

The information was sent but still no refund by mid-February.

The married couple owed nearly $6,500; both work — he is self-employed and she has a job with a W-2 — and have taxes withheld from their paychecks. They filed by paper because of an earlier issue, but the IRS claimed a while back to have never received their tax return. Another return had to be filed. Still no refund money.

In some cases, Brown said, people aren’t finding the information they need when they go online to IRS.gov and try to check the status of their refund online.

“The IRS website will say (the) return is in process,” Brown said, “but it’s been in process for months.”

People might expect an eight- to 12-week delay relating to a refund when there is an issue, but going on months on end is highly unusual, he said.

“It’s unfortunate. It’s a tough thing for the American people. You tell them to file timely. You tell them to square up with the IRS.”

Yet, he said, money isn’t arriving promptly when it’s time for the federal government to pay that refund.

Last August, the IRS announced that interest payments were being made to 13.9 million taxpayers who experienced unusual delays in receiving their tax refunds in 2020.

The interest applied to those who filed a 2019 return by the July 15 deadline last year and either received a late refund or would receive a refund in the future, according to the IRS.

While many tax professionals say 2020 tax headaches continue to get resolved, others say they’re still hearing from unhappy customers who are wondering why they’re not seeing their tax refund money.

The IRS has caught up on the mail, but must deal with other issues that need clarification on individual returns, according to Ken Corbin, the new IRS chief taxpayer experience officer, a newly created position that is designed to better help the agency address taxpayer problems. Corbin also serves as commissioner for the IRS wage and investment division.

“Sometimes, there’s a math or consistency error or something doesn’t quite match our records,” Corbin said in a phone press conference.

“And we have a need to correspond with the taxpayer, either to get a missing schedule; get a corrected SSN, maybe for a dependent; get some information to help clarify that return so we can complete this processing,” Corbin said in that press call on Feb. 11.

“Those returns really are waiting on us to get information or work with taxpayers so we can resolve that issue,” he said.

When those 2019 returns are processed, he said, taxpayers would receive any refund owed as a paper check in the mail.

Taxpayers are encouraged to continue to check “Where’s My Refund?” at IRS.gov for their personalized refund status. But the site also notes some issues, such as a delay in some updates.

When it comes to filing for tax year 2020, Corbin said, the IRS doesn’t anticipate that this will cause a significant delay to the processing of those returns.

“The vast majority of returns that are filed, go right through,” he said.

The IRS is encouraging taxpayers to file their 2020 tax returns electronically and opt to have a tax refund directly deposited into a bank account to receive a tax refund as quickly as possible. About 90% of federal income tax returns are filed electronically.