The IRS has acknowledged that numerous 2020 refunds have been held up and are still being processed, with even some taxpayers that filed at the start of the filing season still waiting for their refunds. The IRS has clarified that some tax returns take longer to process than others, including when a return:
- Includes errors such as an incorrect recovery rebate credit (RRC) amount;
- Was filed with missing information;
- Is affected by identity theft or fraud;
- Includes a claim filed for an earned income tax credit or an additional child tax credit using 2019 income;
- Includes a Form 8379, Injured Spouse Allocation (this can take up to 14 weeks to process); or
- Needs further review in general
The IRS has indicated that the majority of the returns delayed this year are held up due to incorrectly reporting the recovery rebate credit amount. If there is a discrepancy between what was reported on the tax return and what the IRS has on file for the RRC amount (stimulus payments one and two) the IRS is manually reviewing the tax return for credit eligibility. If the eligibility has not been met, the IRS will generate a letter (Letter 105C or Letter 106C, Correspondence for Disallowing a Claim) explaining the taxpayer’s appeals rights. The taxpayer will have to reply to the correspondence before the IRS will continue processing the return. This manual review process could add a significant amount of time to a taxpayer’s return processing depending on the discrepancies.
Another common cause for delay is a suspicion of identity theft. In the last several years the IRS has been particularly mindful of identity theft, with something as simple as an address change or change in filing status alerting the IRS that identity theft may have taken place. If the IRS suspects that a return may be fraudulent, they will send a verification letter to the taxpayer asking them to confirm the return on file was indeed filed by the taxpayer. If you receive a verification letter (typically 5071C, 4883C or 6331C listed as the letter number), please note that these are legitimate letters from the IRS and need to be addressed in order for the IRS to complete their review process.
You can check on the status of your return at IRS.gov or call the IRS hotline at 800-829-1954. If you have any further questions please contact your TBC tax advisor.