IRS postpones start of tax season
The start of tax filing season is postponed by a couple of weeks this year, but the government says it expects to pay most refunds reasonably quickly.
Typically, the IRS begins accepting and processing individual income tax returns in late January. But the agency has pushed back the start of filing to Feb. 12 for returns for the 2020 tax year.
The shift was needed, the IRS said, to allow the agency to update and test its systems to reflect late-year tax changes approved by Congress, including a second round of economic stimulus payments.
“This start date will ensure that people get their needed tax refunds quickly while also making sure they receive any remaining stimulus payments they are eligible for as quickly as possible,” the IRS commissioner, Charles P. Rettig, said in prepared remarks.
This is shaping up to be another challenging tax season for the IRS, which has struggled in recent years with reduced budgets that have forced it to make do with fewer workers and outdated computer systems. During the pandemic, it also has had the extra work of distributing stimulus checks.
Even as it prepares to accept 2020 tax returns, the agency is still wading through a backlog of 2019 tax returns.
Because of the coronavirus, the IRS was delayed in processing some returns, particularly those filed on paper, according to the Taxpayer Advocate Service, the arm of the IRS that speaks for filers. Although most people file returns electronically, about 16 million paper returns were filed last year. As of Dec. 25, there were still nearly 7 million unprocessed individual returns from tax year 2019, according to the IRS website.
Even so, the IRS said, most taxpayers due a refund for the 2020 tax year will get it within three weeks if they file electronically and have the money deposited directly into their bank account. The average refund in recent years has been more than $2,500. Many families use refunds to pay bills or use it as a kind of forced savings plan.
The change in the start of filing season raised concerns about recipients of antipoverty tax credits, like the earned-income tax credit and the child tax credit, who typically have lower incomes and file early to get refunds quickly. But people claiming the credit can expect to receive their refunds beginning in early March, which is typical, as long as there are no issues with their tax returns, the IRS said.
“This would be the same experience for taxpayers if the filing season opened in late January,” the agency said. By law, the agency cannot issue refunds to people claiming the credit until after mid-February, as part of anti-fraud efforts.
The IRS said taxpayers seeking prompt refunds should file their returns electronically. “Avoid filing paper returns wherever possible,” the agency said.
Certain tax forms and attachments can’t be filed electronically, said Erin M. Collins, the national taxpayer advocate, but most can.
The IRS Free File program is ready to use now, if you are comfortable preparing your own tax return. Free File, a partnership between the IRS and tax software companies, is available to people with adjusted gross income of $72,000 or less. The program offers free online preparation and filing of federal returns, but some providers charge fees for state returns. You can complete your return now, and it will be transmitted to the IRS starting Feb. 12.