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Why Your Delayed Tax Return Could Mean More Money Back From the IRS

What's behind the delays, what you can do about it, and why there might be an upside for taxpayers.

If you’ve been waiting a while to receive your tax refund, the good news is that it’s likely not because there’s something wrong with your filing (though if it is, they’ll probably let you know). The bad news is that it’s probably because the Internal Revenue Service is simply overwhelmed for a bunch of different reasons, pandemic-related and not, and that it could be some time before you get the cash the government owes you.

The end result? Millions of Americans are currently being left waiting to receive their returns, just like those waiting for their stimulus checks. And when you consider that the average value of a tax return last year was $2,873, hundreds of millions of dollars being kept out of the economy.

Here’s what you should know about the mess—what’s causing it, what you can do about it, and a small but significant silver lining for those affected.

What’s causing the delay?

The short answer: the IRS is being asked to do more with less.

The job of calculating and distributing 470 million stimulus payments was suddenly foisted on the agency, which has had to do it three times under three different sets of rules. Ensuring that Americans have received the money they’re owed—and are properly claiming it as a Recovery Rebate Credit on their returns—is a lot of work. And it’s being asked to take on a similar role starting this summer when the first payments of the new child tax credit start to go out.

The agency is also dealing with reexamining millions of early filings under changes to the tax code passed by Congress in March.

The IRS is being asked to do all of this extra work with around 15 percent fewer employees than it had in 2010 due to long-time cuts to the agency. Add it all up, and it would be surprising if there weren’t widespread delays.

What can taxpayers do?

All of these changes mean that calls to the agency have more than doubled, according to its commissioner, sometimes peaking at 1,500 calls per second. Only two percent of phone calls to the main IRS hotline are getting through, and even those lucky enough to speak to someone likely won’t find an answer about their refund.

The better thing to do is to use the agency’s Where’s My Refund? tool. When the IRS has updated information about your return, this is where it will be.

Other than that, unfortunately, the only thing people waiting for their returns can do is, well, wait.

Will taxpayers facing these delays be compensated?

Yes. The IRS pays interest on late refunds at a rate of about three percent annually. For most tax refunds issued after April 15, the agency will pay interest when it finally sends the refund.

But be careful: where the IRS giveth, the IRS taketh away. Any interest received counts as taxable income, which means you should be prepared to pay taxes on it when you file next year.