Since the start of the pandemic in 2019, the tax industry has had, heard, and experienced more issues than ever before. As we head into a third tax season during the pandemic, let’s take a look into the potential delays, frustrations, and uncertainties to be had!
There will be some signs of normalcy this upcoming tax season, such as the individual tax deadline returning to its typical mid-April deadline for the first time since 2019. This comes as the IRS says it has steadily been reducing its backlog of 2020 tax returns and other additional paperwork. With this being said, there still is not guaranteed smooth sailing as the IRS will still need to deal with the remaining work from 2020 as well as additional work that could come with the prospect of retroactive legislation.
IRS Update
The IRS gave an update very late last month stating it has processed all individual refund returns received before April 2021, pending no errors and no requirement for additional review. The IRS also put a number on the remaining unprocessed individual returns which total out to 6.3 million overall. With 6.3 million individual returns needing to still be driven to completion, some delays could be expected still even in the new tax season.
Tax Break Troubles
As this year’s tax season starts, some tax breaks created to help American’s cope with the economic hardships of the pandemic will cause extra work to be required on the IRS’s part. This includes reconciling the advanced payments on the child tax credit, as well as additional work needed for those who did not receive March’s $1,400 stimulus payment but will be claiming it on their 2021 returns.
The IRS will be sending out notices to taxpayers in January detailing the government’s records of how much people received in stimulus and advanced child tax credit payments in 2021. Mismatches between the numbers received and the numbers on an individual’s tax return could lead to additional processing delays as the IRS addresses the discrepancy or error. This process may be increasingly challenging for households who have added children or significantly changed their income.
Implications
The IRS has been catching up on its built-up backlog, however, taxpayers can still expect to see some issues this tax season. The issues had detailed above do not take into account any additional work stemming from Democrats stalled $2 trillion Build Back Better Bill. This is why DSJ recommends you get your tax information in as early as possible, as it will increase the chances of your returns timeliness and there will be more time to react and strategize over any potential changes on the horizon.
What does this mean for my return? For a better understanding feel free to give us a call at 516-541-6549.