The IRS has a backlog of 1 Million Tax Returns to process

The Internal Revenue Service still needs to process about 1 million paper tax returns after the coronavirus pandemic and subsequent stay-at-home mandate upended operations, the agency’s commissioner told Congress during recent Capitol Hill testimony.

As of Nov. 20, the IRS had processed about 162.4 million of the 168.6 million returns it had received. During the same time last year, the agency had processed almost all of the returns it had received — about 155 million out of 155.4 million.

“We have done all that we can really do,” IRS Commissioner Charles Rettig told the House Ways and Means Oversight Subcommittee, adding: “On behalf of the Internal Revenue Service and every employee, for literally every American, we appreciate the patience and understanding. This is not an excuse, but I will say that our employees went through the same exact thing as every other American during COVID with respect to health and safety concerns.”

While the delay is potentially inconvenient for Americans still reeling financially from the crisis, the IRS is paying interest on the overdue refunds.

Taxpayers with a refund issue date between April 15 and June 30 earn an annual interest rate of 5%, while refunds issued between July 1 and Sept. 30 earn an annual interest rate of 3%, the IRS said. Like it charges interest when taxpayers don’t pay on time, the IRS also pays interest to taxpayers when the government issues refunds too slowly.

The decision stems from a quirk in the tax code and in the way the filing deadline was extended, according to The Wall Street Journal.

In March, the Treasury Department extended the tax filing deadline from April 15 to July 15 as a result of the virus-induced pandemic, which dragged the nation’s economy into the worst downturn since the Great Depression.

During that time, the agency continued to process electronic returns and issued refunds via direct deposits.

But when the IRS directed most of its employees to work remotely in mid-March, bringing a host of the agency’s typical functions to a grinding halt, it created a tremendous backlog in paper returns. At one point, the overflow was so great that the IRS had to rent tractor-trailers and separate storage space to store the documents until workers could return and start sorting through them, Nina Oldson, the director of the Center for Taxpayer Rights, told NPR.

Further complicating operations was the distributions of tens of millions of stimulus checks, the $1,200 cash payments allocated with the passage of the March CARES Act. Rettig said the IRS has contacted 4,000 homeless shelters to ensure that individuals staying there receive the money.

The IRS now has 3 million pieces of unopened mail, down from 5.3 million.