National Taxpayer Advocate Erin M. Collins delivered a report to Congress on Wednesday detailing the “most serious problems” currently faced by taxpayers.
In her 2024 Annual Report to Congress, Collins highlights the second most serious problem as delays in tax return processing, which leads to refund delays.
If a tax refund is delayed by more than 45 days, the IRS is legally required to pay interest on top of the refund. While this is good for the taxpayer, Collins noted that it’s not financially beneficial for the IRS.
Why It Matters
Both Americans filing electronically and by paper are experiencing tax return processing issues. In 2024, almost 18 million taxpayers filing electronically had their Form 1040 rejected, leading to refund delays. A majority of rejected returns are valid, according to the report.
And despite recent improvements in automation, the Internal Revenue Service (IRS) could only electronically scan 58 percent of paper returns, leaving IRS employees to manually enter data—and slowing processing times.
What To Know
Tax refunds are typically issued in three weeks or less when filed electronically and six to eight weeks for paper returns.
However, if you don’t receive your tax refund within 45 days, the IRS is legally required to pay you interest, compounded daily, until the refund is issued.
According to the IRS, non-corporate overpayments (which encompasses individuals) earn 7 percent interest. These rates change quarterly, meaning the percentage could be slightly different in April.
Low-income individuals qualifying for the Earned Income Tax Credit (EITC) are especially affected by delayed returns, according to the report.
“Research shows that food insecurity is one consequence for low-income taxpayers, but refund delays may also jeopardize other critical necessities, such as maintaining housing stability or ensuring they can meet health-related needs,” per the report.
Created in 1996, the Taxpayer Advocate Service is an organization that operates independently within the IRS. In its yearly report, the organization is legally required to pinpoint the top 10 most serious problems taxpayers encounter when interacting with the IRS, with accompanying recommendations for how the government and IRS can solve them.
The organization received upwards of 260,000 cases between October 2020 and the end of September 2021, along with just under 3 million calls to its hotline—pointing to the importance of such services.
What People Are Saying
Alex Beene, financial literacy instructor for the University of Tennessee at Martin, told Newsweek: “Delays can be absolutely brutal for some taxpayers, and unfortunately during the pandemic and in its immediate aftermath, we saw those delays in processing stretch even further. With the Inflation Reduction Act providing more funding to the IRS, some of those delays should start to shorten, but for some groups, we still see above-average waiting times, with the most common taxpayers affected being those who file by paper, those who make extensive mistakes in their paperwork, and, sadly, those who have fallen victim to identity theft and have to submit a new form.”
Erin M. Collins, National Taxpayer Advocate, said in the report: “For the first time since I became the National Taxpayer Advocate in 2020, I can begin this report with good news: The taxpayer experience has noticeably improved… In 2024, taxpayers and practitioners experienced better service, generally received timely refunds, and faced shorter wait times to reach customer service representatives (CSRs)[…]”
“…After receiving multiyear funding, the IRS has made major strides toward improving its taxpayer services and information technology (IT) systems. However, IRS service remains far from perfect[…]”
The IRS said in a December news release: “Filing electronically and selecting direct deposit remains the fastest and safest way for taxpayers to receive their 2024 tax refunds. Direct deposit ensures quicker access to refunds compared to receiving a paper check.”
What Happens Next
“It’s difficult to say how much Congress will act on refund delays in the coming year,” said Beene. “The incoming administration has signaled other priorities involving everything from reduced taxes to new tariffs. Calls to staff more at the IRS to make these delays manageable seem to be mostly falling on deaf ears[…]”
Beene notes that no matter what Congress decides, it’s important to contact the IRS immediately if you experience a refund delay this tax season.
“You don’t want to delay contacting the IRS… the longer you put off reaching out to them about your situation, the more likely it is for that delay to be prolonged,” he said.
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