May 8, 2021 - Douglas Myser

IRS is holding millions of tax returns. With the of tax identity theft, and refund fraud that has plagued the IRS in the last decade, the agency has taken a slower, lets take more time approach, to reviewing tax returns that may be questionable, in a concerted effort to stem the tide of the fraud. The IRS is holding 29 million tax returns for manual processing, delaying tax refunds for many Americans, according to the National Taxpayer Advocate, an independent arm of the tax agency that looks out for consumers interest. The delays are prompting some taxpayers to fret over social media about weeks of waiting in limbo for their money. Typically, the IRS sends most refunds within three weeks of taxpayers filing their return. But this year is complicated by a rash of several issues, including a backlog of 2019 paper tax returns that the IRS was unable to process after shuttering its offices during the pandemic. Even a tax resolution company had difficulty contacting the IRS. IRS is holding millions of tax returns.

A recent notice from the IRS said that some people may experience a longer than average wait for their payments. That may especially impact tax returns that need a correction due to changes made by the Recovery Rebate Credit---a tax credit adjustment for people who were owed more stimulus money---or to verify income for the Earned Income Tax Credit and Additional Child Tax Credit, according to the agency. "This work does not require us to correspond with taxpayers but does require special handling by an IRS employee so in these instances, it is taking the IRS more than 21 days to issue any related refund," the IRS said in a March 18 post.

To be sure, the IRS has processed far more tax returns than not, with Taxpayer Advocate Erin Collins noting in a blog post this week that the tax agency has gone through more than 91 million individual tax returns filed for the 2020 tax year and issued more than 68 million refunds so far. The IRS has also distributed more than 161 million payments for the third stimulus check over the past several weeks, adding to its workload during the current tax season.