Taxpayers who filed paper returns could face ‘extreme delays’ in getting refunds

Millions of taxpayers who mailed in their 2019 tax returns may have to wait longer to get their refunds, according to a new watchdog report.

Nearly five million paper tax returns are sitting in mail facilities and it’s unclear when all the returns can be processed, according to a new report by the National Taxpayer Advocate, even though the Internal Revenue Service has reopened its operations after suspending them due to the coronavirus pandemic.

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“Taxpayers who filed a 2019 paper return and are entitled to refunds may be in for a long wait,” National Taxpayer Advocate Erin Collins said in her report to Congress. “The IRS had to suspend the processing of paper tax returns, and as of May 16, it estimated it had a backlog of 4.7 million paper returns.”

The Internal Revenue Service headquarters building appeared to be mostly empty April 27, 2020 in the Federal Triangle section of Washington, DC. (Photo by Chip Somodevilla/Getty Images)

The IRS suspended the processing of paper tax returns at the end of March, according to the report. Instead, the IRS encouraged taxpayers to use electronic forms to file their returns, saying that paper returns would be processed once those centers were ready to reopen.

The IRS began reopening its operations across the country in June with facilities operating in 11 states and Puerto Rico. The agency plans to reopen its remaining facilities on July 13.

Read more: Here’s why the IRS would want to audit your taxes

At the same time, taxpayers had limited communication channels with the IRS because its accounts management telephone lines, Taxpayer Assistance Centers, and mail operations were shut down. That limited taxpayers to the website and an automated phone line for communication, the report found.

“For weeks, taxpayers experienced problems communicating with the IRS in person, through the mail, and by phone,” Collins said. “The IRS tried to steer taxpayers toward online tools to the extent possible; however, not all taxpayers are comfortable interacting with the IRS through this service channel for a variety of reasons.”

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Processed paper tax returns are down by 75% as of May 22, while e-filed returns are down by just 9% compared with the same time last year, the report found.

“While the overwhelming majority of taxpayers file electronically, taxpayers who file paper returns are experiencing extreme delays in processing their returns,” Collins said. “Many taxpayers are facing financial hardship associated with the COVID-19 crisis and need the IRS to process their paper-filed returns as soon as possible and release their refunds.”

Denitsa is a writer for Yahoo Finance and Cashay, a new personal finance website. Follow her on Twitter @denitsa_tsekova.

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