Tax Refund Delays: Why Does The IRS Still Have 35 Million Unprocessed Tax Returns?

The Internal Revenue Service (IRS) has had a lot on its plate during the recent tax season. In addition to processing 136 million tax returns, according to a report from National Taxpayer Advocate Erin Collins, it sent out a round of stimulus checks, updated rules for unemployment insurance, and prepared to launch advance payments for the Child Tax Credit. And the IRS, which has seen staffing and funding cuts over the previous decade, did all of this during the tail end of a pandemic. But their efforts to weather what Collins described as a “perfect storm” came up a little short. The agency still has about 35 million unprocessed tax returns.

“The IRS and its employees deserve tremendous credit for what they have accomplished under very difficult circumstances, but there is always room for improvement.” Collins wrote in her report.

“This year, the IRS is dealing with an unprecedented number of returns requiring manual review, slowing
the issuance of refunds,” Collins continued. “These processing backlogs matter greatly because most taxpayers overpay their tax during the year by way of wage withholding or estimated tax payments and are entitled to receive refunds when they file their returns. Moreover, the government uses the tax system to distribute other financial benefits.”

The 35 million pending returns account for 20 percent of the total returns submitted. And with the May 17 federal tax deadline over six weeks in the past, the IRS is well beyond the 21-day processing time it typically strives for. Myriad reasons account for the delay.

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