IRS has failed to process refunds in a timely manner following the tax season. The delay has got Americans upset. Their money, due in the form of tax returns, is now significantly delayed and waiting for several weeks, or rather months, has become the new norm. There are a host of reasons behind this unfortunate situation. Layoffs in the workforce, snares in the timely issuance of 1099 forms, and a change in tax law all came together, accidentally of course, to fabricate the most hectic tax processing period in recent memory.
A set of unfortunate circumstances has worked to the disadvantage of the Internal Revenue Service (IRS), who not only were the 11% workforce shortage reported in February one of those circumstances but are now much more pressured by various stakeholders: taxpayers, tax professionals, and the U.S. Congress.
Refund Delays Affect Millions
Despite the fact that the IRS assured that a majority of the returns which were e-filed with direct deposit would be completed within 21 days, numerous reports now reveal that advisers and banks are processing millions of refunds in 30 to 45 days or even longer with some not being processed for several months after submitting.
A lot of these delays have been a result of the forms, the 1099 ones, that did not match or needed to be corrected, especially those of gig workers and freelancers. A tax preparer confirmed the increase in the cases of returns rejected for a manual review by saying that In Chicago, we have seen a lot of flagged returns if a 1099-K or 1099-NEC was received subsequently, the return would be delayed for sure. Not long ago…
IRS Staffing Crisis Impacts Operations
The agency has lost about 91,500 workers, down from the previous number of over 103,000 as of now. The loss of the personnel was to the detriment of customer service, processing returns, and refund issuance.
“The IRS is really banking on humans—it’s people, who come to the rescue when a return is wrongly ‘flagged’ or amended,” were the words of a former Treasury official. “Even with people, a bottleneck still occurs with fewer people distancing.”
Tax Code Changes Contributed More to the Chaos
Typically, last-minute changes to the laws were proposals made by the government. Congress – in the eleventh hour – without considering opinions of different stakeholders, made law amendments, which influenced the qualifications of the EITC, CTC, and modifying the standard deductions. The tax software providers had to release immediate updates to remain compliant with some of the changes made by the IRS, that is, the taxpayers’ tax numbers had to refile corrected returns.
A tax advisor in Atlanta commented on the situation: “15 years of tax advising and I must say that this is the one which has caused me the most headache. The software was all set to go, but the IRS was not ready.”
The Confusing Situation Even w/o Checks Almost of Paper Presence
The Internal Revenue Service made a decision that in the near future it will discontinue sending out paper refund checks from September 30, 2025. However, public consultation with the users of their services was not performed and thus many people still expected the traditional paper mail for their refunds.
There are still some problems identified like money to returns from accounts that no longer exist or are invalid. Through electronic means, the IRS has to stop the balance and transmit it again to the receiver, all electronically. All tax filers are urged by the service not to wait until they file their tax returns before checking their bank account information for accuracy, yet the message reached many of them too late for action.
Interest, a Good Thing or a Painful Catch-22 of Delayed Refunds?
The only upside that people can see from the case of delayed refunds is the interest factor. In case a refund is held back from taxpayers by the IRS for more than 45 days, the Federal law states that the IRS needs to pay an interest that is currently at a rate of 8% per annum and compounded daily. Nevertheless, this also serves as a warning flag since the taxpayers will have to include the amount in their income tax due for the next year and report it to the IRS.
“I filed my taxes in February and didn’t get my refund yet,” complained one tax payer from Texas. “Seems like the only thing to do now is hope for some good interest on their part and I myself get it much faster.”
How Taxpayers Are Contributing Now?
Even with the continuous backlog, the IRS is asking taxpayers to do the following:
- Use the “Where’s My Refund?” tool at IRS.gov
- Download the IRS2Go app for mobile status updates
- Better not to file again, which can worsen the situation
- Make sure your banking details are correct in your filing software or IRS profile
Filers, who have received a notification for an inquiry, should quickly reply as it will be crucial to preventing more delays in the process.
What You Learned
It is clear that little faith is left in the system, and the slow issuance of refunds is a bothersome ordeal for the families that the tax credit was intended to benefit. For millions of Americans waiting for their refunds, the only concern is no longer payment but time.
While the IRS is handling many absences, old systems, and the burden of a large caseload, they need to work on one thing: the restoration of trust before next year’s returns are due.
