Some Americans to Receive Extra Money from IRS in Addition to Tax Refund

National Taxpayer Advocate Erin M. Collins recently delivered a report to Congress outlining the most serious problems currently faced by taxpayers. One of the key issues highlighted in her 2024 Annual Report to Congress is the delays in tax return processing, which ultimately lead to refund delays for taxpayers. This delay not only impacts individuals waiting for their refunds but also poses financial challenges for the IRS.

Tax refunds are typically issued within three weeks for electronic filers and six to eight weeks for paper returns. However, if a taxpayer does not receive their refund within 45 days, the IRS is legally required to pay interest on top of the refund amount. This interest, compounded daily, can add up and become a financial burden for the IRS. The report emphasizes that while this is beneficial for taxpayers, it is not financially sustainable for the IRS in the long run.

Both electronic and paper filers are experiencing processing issues with their tax returns. In 2024, nearly 18 million taxpayers who filed electronically had their Form 1040 rejected, leading to further delays in receiving their refunds. Despite advancements in automation, the IRS could only electronically scan 58 percent of paper returns, forcing IRS employees to manually enter data and slowing down the processing times.

Low-income individuals who qualify for the Earned Income Tax Credit (EITC) are especially affected by delayed returns, as refund delays can impact their ability to meet essential needs such as food, housing, and healthcare. The Taxpayer Advocate Service, an independent organization within the IRS, received over 260,000 cases between October 2020 and September 2021, highlighting the importance of addressing these issues.

Experts in the field, such as Garrett Wattson from the Tax Foundation and financial literacy instructor Alex Beene, emphasize the need for both internal improvements at the IRS and congressional action to address these challenges. While recent funding increases have allowed the IRS to make progress in improving taxpayer services and IT systems, there is still room for improvement.

Looking ahead, it remains uncertain how Congress will address refund delays in the upcoming year. However, taxpayers are advised to contact the IRS immediately if they experience delays in receiving their refunds during the 2025 tax season. Prompt communication with the IRS can help expedite the resolution of any issues and prevent further delays.

In conclusion, the report delivered by National Taxpayer Advocate Erin M. Collins sheds light on the pressing issue of tax return processing delays and their impact on taxpayers. By addressing these challenges through a combination of internal improvements and congressional action, the IRS can work towards providing a more efficient and timely refund process for all taxpayers.