TaxWatch: ‘Come on, it’s over a year’: Spare a thought for these people who are still waiting for their 2019 tax refund

Taylor Adams is using her 2020 tax refund to bulk up her savings, and pay for improvements to her new North Carolina house.

As for her 2019 refund? She needs to get it first.

Approximately 15 months after Adams mailed in a federal income tax return seeking a $933 refund, she and her husband are still waiting for a check.

“I feel kind of lost because I’ve heard nothing about it,” said Adams, 27, who lives in the suburbs of Charlotte, N.C. “Time just kept passing on and we still didn’t receive it and, next you know, it’s already time to file our 2020 taxes.”

In San Luis Obispo, Calif., Monique Grajeda is waiting for her $1,944 refund for this year and her $3,647 refund for last year. “Everything in the whole system seems to be broken down and not reliable,” she told MarketWatch.

Grajeda, 55, a self-employed residential architectural designer, understands delays can occur, especially during a pandemic “but, come on, it’s over a year. It doesn’t seem right.”

As the 2020 tax season draws to a close on Monday, Adams and Grajeda are reminders the IRS is still bogged in a backlog on its 2019 returns.

The pile of pending returns is a lingering consequence of the pandemic’s initial shockwaves last spring.

Courtesy Taylor Adams

But some observers say the backlog is also warning sign lawmakers could be asking too much of a tax collection agency that’s now gone through two pandemic-era tax seasons, three rounds of stimulus checks and is gearing up to distribute millions of recurring Child Tax Credit payments beginning this summer.

This is on a budget that’s dropped roughly 20% in 10 years, adjusted for inflation, and a staff headcount that’s shrunk by the same rate. The Biden administration wants to increase the IRS budget next year, with the money going to more audits and enforcement against companies and high net worth taxpayers.

“We have to stop using the IRS as a means of disbursing money across the population this way,” said Donald Williamson, Adams’ great-uncle who prepared her 2020 and 2019 returns for free. Williamson also happens to be a longtime accountant and the executive director of American University’s Kogod Tax Center. He’s got three clients waiting on 2019 refunds.

“ ‘Some observers say the backlog is also warning sign lawmakers could be asking too much of a tax collection agency that’s now gone through two pandemic-era tax seasons.’ ”

By early May, the IRS said it still has “600,000 individual tax returns received prior to 2021 in the processing pipeline.” It could take until the summer for the agency to push all the pending returns off its to-do list, Internal Revenue Service Commissioner Charles Rettig told senators last month.

“Summer could be May or it could be September. I could just assure you we are giving it our best,” he said, noting staff is on all kinds of extra work shifts to get through the backlog.

For months, lawmakers have been pressing Rettig on the latest news because their own offices hear from constituents who are still waiting.

Earlier this month, a Treasury Inspector General for Tax Administration (TIGTA) report examined the backlog’s status.

One problem was the lack of a full fleet of working printers and copiers at two processing centers, TIGTA said. (The IRS said it was working on the issue.)

The watchdog agency said it was also concerned whether the IRS had enough staff to handle the current 2020 returns and the backlog.

The IRS did not respond to a request for comment on Adams’ and Grajeda’s case. Through early May, the agency has received 126.7 million tax returns for the current tax season.

Courtesy Monique Grajeda

‘We could have really used that money’

The IRS amassed more than 20 million pieces of unopened mail when it temporarily closed down its processing centers from March 2020 through June 2020 as COVID-19 cases climbed. That mound included millions of hard-copy income tax returns, like Adams’ return.

For the fastest turnaround, the IRS advises submitting returns electronically with direct deposit information included. Adams mailed the 2019 return in early March 2020 and didn’t include direct deposit, meaning she and her husband would get a paper check.

There was a time when Adams was checking the ‘Where’s My Refund’ portal on a weekly, even daily basis. “We could have really used that money to put towards the down payment,” said Adams, a digital imaging specialist for a tech company enabling shoppers to see how furniture looks with different patterns and colors.

At this point, Adams and her husband try to see the bright side. They have chosen to regard it as “a nice extra bonus that we forgot about” whenever it arrives.

“ ‘I’m just thankful my husband and I are in a place where we are not dependent on having that money to keep us going.’ ”

— Taylor Adams, 27, who lives in the suburbs of Charlotte, N.C.

Also, Adams added, when she thinks about the refund-in-waiting, it provides perspective. “I’m just thankful my husband and I are in a place where we are not dependent on having that money to keep us going,” she said.

Grajeda had a similar perspective. “I’m not on the street,” she said. “But I obviously really could use it for multiple reasons.”

For example, the refund money could fix a dent in Grajeda’s car, or pay for vision and dental procedures that her insurance will not cover.

Unlike Adams, Grajeda filed both her 2019 and her 2020 income tax returns electronically, and with direct deposit information included, according to Dan Herron, a partner at Better Business Financial Services in San Luis Obispo, who prepared Grajeda’s returns.

Grajeda’s returns were “nothing out of the ordinary,” he said.

Grajeda recently signed off on paperwork allowing Herron to talk with the IRS about the case. “I’m going to have get on the phone with them and figure out what’s going on,” Herron said.

While Grajeda keeps waiting, the biggest toll for her is the “disillusionment” and growing seed of doubt that government can do what it’s tasked to accomplish, she said. “Well, gosh if this agency isn’t acting the way it should, what about other agencies?” she said.

And it makes her wonder what she’d have to do, and what recourse she’d have, if the IRS makes a mistake on her tax return in the future. “If that system is that fouled up, what if they send out something wrong?”

Eroding trust?

The tax backlog is unquestionably bad for the finances of the people who are waiting, said Brian Fallon, a Cleveland, Ohio tax preparer who is the site coordinator for a local volunteer income-tax assistance program.

There’s still a handful of these long-waiting returns within his program. Fallon worked with one couple for months on the grinding process of amending 2019 returns, addressing IRS questions and getting the return back to the agency. The couple is expecting an approximate $7,000 refund for the 2019 tax year.

That’s money they could have surely used when the wife, a waitress, at one point had to go on unemployment, Fallon noted.

But putting aside money, Fallon says the psychological toll has been hard for the couple — and the IRS could ultimately pay the price.

“ ‘If you’re sitting at home waiting for a year, that stuff just seems like sugar-coated happy talk.’ ”

— Brian Fallon, a Cleveland, Ohio tax preparer on the Congressional hearings on income-tax returns during the coronavirus pandemic

“They are waiting for their money. As a tax professional, I know they’ve done nothing improper. They don’t know and they think there’s a problem with their return and ‘the IRS is going to come after us.’ They have a great fear,” he said.

Fallon spent 12 years as an IRS revenue officer, a job where he knocked on the doors of people badly behind on their taxes.

America’s tax collection relies heavily on voluntary compliance, and trust that taxpayers will pay their share and the IRS treats them fairly.

A backlog erodes that trust and emboldens scofflaws, Fallon said. “The idea would be, ‘Hey the IRS can’t even get the regular returns right. They’ll never catch me.’”

Fallon hears IRS communications and Capitol Hill testimonies about the work to fix the backlog. “If you’re sitting at home waiting for a year, that stuff just seems like sugar-coated happy talk,” he said.

In North Carolina, Taylor Adams said she’s mad and frustrated, but also trying to think of the 2019 refund as a “nice surprise when we do get it.”

She thought the long-awaited moment finally arrived earlier this month when she saw some formal-looking piece of mail from the federal government.

It turned out to be a standard White House confirmation letter that she and her husband both received $1,400 stimulus checks months earlier.

“We got our hopes up,” she said.

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May 18, 2021 at 02:43PM
Andrew Keshner
http://www.marketwatch.com/news/story.asp?guid=%7B20C05575-04D4-B545-7423-37D5E6EA22D7%7D&siteid=rss&rss=1