For many Americans, the tax season of 2020 brought unexpected delays. Individuals and families who filed their returns early anticipated quick processing and prompt refunds. However, millions were left waiting for months, with some not receiving their refunds until well into 2021. This created a great deal of financial strain, especially for households that rely on their refund as a critical annual financial cushion.
Understanding what caused these delays is the first step to avoiding them in the future. The circumstances of the 2020 tax season were unique in many ways. From pandemic-related disruptions to retroactive legislation and overburdened government systems, a variety of factors played a role in delaying the disbursement of refunds.
Impact of the Pandemic on the IRS
The COVID-19 pandemic drastically altered the operations of organizations across the country, and the Internal Revenue Service was no exception. As workplaces moved to remote setups and staffing levels were reduced for safety, the IRS struggled to maintain normal processing speeds. These staffing shortages affected not only the handling of tax returns but also the customer service capacity of the agency.
The transition to remote work slowed down document processing and communication across departments. With fewer employees working in IRS offices and a growing pile of tax returns, it quickly became clear that the 2020 filing season would be anything but routine.
The IRS was also tasked with additional responsibilities during the pandemic. In response to the economic fallout, Congress passed multiple relief packages, which the IRS had to implement. These included issuing economic impact payments, adapting to new tax rules, and providing support to struggling taxpayers. All of this added to the agency’s already massive workload.
Retroactive Tax Changes from the American Rescue Plan
One of the most significant disruptions came from the American Rescue Plan, which was signed into law in March 2021. This legislation introduced several retroactive changes that impacted 2020 tax returns, many of which had already been filed by that time.
A key provision of the law exempted a portion of 2020 unemployment benefits from income tax for qualifying individuals. As a result, millions of people who had already filed their returns had to wait for the IRS to recalculate their taxes and issue additional refunds where applicable. This caused a ripple effect across the entire system, delaying the processing of new returns.
Another part of the American Rescue Plan adjusted eligibility for tax credits and expanded their scope, requiring IRS systems to be updated to reflect the changes. This created an additional layer of complexity for returns already in the processing pipeline.
Manual Reviews Due to Recovery Rebate Credit Claims
Another major source of delay stemmed from the Recovery Rebate Credit. This credit allowed taxpayers who did not receive one or both of their stimulus payments to claim the missing amount on their 2020 tax return.
However, discrepancies between what taxpayers claimed and what the IRS had on record frequently triggered manual reviews. For example, a taxpayer might have believed they only received one stimulus payment when, according to IRS records, both payments had been issued. Such mismatches required the IRS to pause processing on the return to investigate further.
Manual reviews significantly increase processing time. Returns that are flagged for review are removed from the automated system and must be evaluated by an IRS employee. Given the volume of claims and the limited number of available staff, this created a bottleneck.
Lookback Rule Complications
The lookback rule added another wrinkle to an already complicated tax season. This provision allowed taxpayers to use their 2019 earned income instead of 2020 income when calculating the Earned Income Tax Credit or Additional Child Tax Credit.
This rule was especially useful for individuals who lost income during the pandemic. However, using prior-year income added complexity to the tax filing process. The IRS had to verify that the information was reported correctly and matched previous returns. This verification process could not be automated in all cases, leading to additional delays.
Returns claiming either the Earned Income Tax Credit or the Additional Child Tax Credit using the lookback rule were automatically flagged for closer inspection. Though the rule was intended to provide relief, it inadvertently became another reason why many refunds were delayed.
IRS Technology Limitations
The IRS relies on an aging technological infrastructure, and its systems were not built to accommodate the demands of pandemic-era tax processing. Even before 2020, the agency faced criticism for its outdated technology. The massive increase in volume and complexity during the pandemic only highlighted these shortcomings.
Automated systems struggled to keep up with changes to tax rules. When systems failed to reconcile discrepancies automatically, the returns were pushed to manual processing queues. Given the scale of claims involving stimulus payments, unemployment compensation, and tax credits, these queues grew rapidly.
Software incompatibilities and communication lags between various parts of the agency slowed things down even more. While efforts have been made to modernize the IRS’s systems, they were not sufficient to handle the extraordinary circumstances of the 2020 tax season.
Lack of Communication and Transparency
Frustrating many taxpayers was the lack of clear communication from the IRS. Where’s My Refund? The tool is designed to provide updates on refund status, but during 2020, many users reported that it was not helpful. The tool often displayed a generic “return received” status for weeks or even months, with no further explanation.
This created a sense of helplessness for taxpayers who had followed the rules, filed on time, and still had no information about when their refunds would arrive. Phone support was limited, and those who attempted to get answers often found themselves on hold for hours or were met with automated messages that provided no real solutions.
Case Scenarios Illustrating Common Delay Triggers
To better understand why certain returns were delayed, consider these real-world examples:
Scenario 1: Recovery Rebate Credit Mismatch
Laura filed her 2020 tax return and claimed a $1,200 Recovery Rebate Credit, believing she had not received her second stimulus payment. According to the IRS, both payments had already been issued to her in the correct amounts. Because the numbers didn’t match, her return was flagged for manual review. It sat in processing for months before the issue was resolved.
Scenario 2: Use of Lookback Rule for Earned Income Tax Credit
Mike lost his job in mid-2020 and had very low earned income for the year. To maximize his refund, he applied the lookback rule and used his 2019 income to calculate the Earned Income Tax Credit. Since this involved cross-referencing past returns and verifying eligibility, his return was held for manual review, leading to a significant delay.
Scenario 3: Paper Filing During a Pandemic
Sara mailed in her 2020 return using paper forms. Due to the pandemic, the IRS had fewer employees on-site to open and process physical mail. Her return wasn’t even logged into the system for several weeks, and by the time it was processed, a backlog had already formed.
Backlog and Its Lingering Effects
Even months after the tax deadline passed, the IRS continued to report millions of unprocessed returns. The backlog created in 2020 and 2021 was unprecedented. This delay didn’t just affect tax refunds; it also impacted adjustments, corrections, and ongoing communications with taxpayers.
Delays also interfered with the processing of amended returns and responses to IRS notices. For many people, this created a cascade of issues, as they waited for one matter to be resolved before moving forward with others.
The Bigger Picture: IRS Challenges and Public Trust
The extended delays of the 2020 tax season had far-reaching effects. For one, they raised questions about the IRS’s capacity to handle emergencies and complex legislative changes. While many acknowledged that the agency was under tremendous pressure, the experience left many taxpayers with diminished trust in the system.
There were also broader implications for public policy. As tax credits and stimulus payments became essential components of the government’s response to the pandemic, the ability of the IRS to deliver those benefits efficiently became a matter of national importance.
Policymakers were forced to confront the reality that an underfunded and technologically outdated IRS is less capable of meeting its obligations during a crisis. Discussions about increasing IRS funding and accelerating modernization efforts gained momentum as a result.
How to Avoid Refund Delays When Filing Your Taxes
After the chaos and widespread delays of the 2020 tax season, many taxpayers are understandably eager to avoid similar problems in future years. While some factors that cause refund delays are outside of your control, there are several steps you can take to reduce the chances that your return will be flagged or held up during processing.
The IRS is still working to recover from the backlogs and disruptions brought about by the COVID-19 pandemic, but many of the same lessons still apply. Ensuring your return is complete, accurate, and submitted in the most efficient way possible can go a long way in speeding up your refund. We will walk you through the most effective strategies to help avoid refund delays and make tax season less stressful.
File as Early as Possible
One of the most reliable ways to receive your refund faster is to file your return as early as you can. The IRS begins processing returns in late January, and they do so in the order they are received. Submitting your return early places you near the front of the processing queue.
Filing early also gives you time to fix any unexpected issues, such as missing documents or discrepancies in your income statements, without delaying your refund. If you wait until close to the deadline to file and then encounter a problem, your return may be pushed into a backlog of late-season filings.
Taxpayers who file early are also less likely to become victims of identity theft. One of the most common forms of tax-related fraud involves someone else filing a return using your personal information. By filing early, you minimize the opportunity for someone else to use your identity fraudulently.
Choose Electronic Filing Over Paper
Filing your tax return electronically is one of the most important steps you can take to speed up your refund. Paper returns must be physically opened, scanned, and entered into the IRS system by hand, which can take weeks, especially during times of high volume or limited staffing.
In contrast, electronic returns are submitted directly into the IRS processing system. They are less likely to contain errors, and the built-in validation checks in most e-filing software reduce the chance of missing information or miscalculations. When you e-file, you also receive a confirmation once your return is accepted. This can give you peace of mind and a clearer picture of when to expect your refund.
Opt for Direct Deposit
In addition to e-filing, choosing direct deposit is the fastest way to receive your tax refund. When you request direct deposit, the IRS sends your refund directly to your bank account. This eliminates the delays involved with printing and mailing a paper check.
Make sure to enter your bank routing and account numbers accurately. A mistake in this information could result in a rejected deposit or even a misdirected refund, which can cause significant delays. You also have the option to split your refund into multiple accounts. This can be a useful budgeting tool, and it doesn’t affect the speed of delivery.
Gather All Documents Before Filing
Before you start preparing your return, gather all necessary tax documents to ensure completeness and accuracy. Missing or incorrect information can trigger a review or delay the processing of your return.
Some of the key documents to collect include:
- W-2s from all employers
- 1099 forms for freelance income, investments, or unemployment benefits
- Form 1098 for mortgage interest or tuition payments
- Letter 6419 outlining advance Child Tax Credit payments
- Letter 6475 documenting any stimulus payments received
Double-check the amounts reported on these forms against your personal records. If you notice any discrepancies, contact the issuer before filing to resolve the issue.
Ensure Accuracy in Your Return
Errors and inconsistencies are among the most common reasons that tax returns are delayed. Small mistakes like entering the wrong Social Security number, omitting income, or misreporting credits can cause your return to be flagged for review.
Here are some tips to improve accuracy:
- Carefully enter personal information, including names and Social Security numbers, exactly as they appear on official documents
- Report all income, even if you didn’t receive a 1099 for it
- Double-check calculations, especially if you are not using tax software
- Use official IRS letters to verify the amount of credits received
Filing a complete and correct return the first time around gives you the best chance of having it processed without delays.
Be Cautious When Claiming Credits
Refund delays often result from complications in claiming certain tax credits. If you plan to claim the Earned Income Tax Credit, Additional Child Tax Credit, or the Recovery Rebate Credit, be sure to fully understand the eligibility criteria and use accurate amounts.
When claiming the Earned Income Tax Credit or Additional Child Tax Credit, double-check your income and dependent information. If you’re using the lookback rule to apply income from a previous year, make sure that you’re eligible and enter the correct income figures.
For the Recovery Rebate Credit, compare your calculations with the amounts provided in IRS letters. If you claim more than what IRS records show was issued to you, your return could be flagged and reviewed manually.
Monitor the IRS Refund Tool
Once your return has been accepted, you can track its progress using the IRS’s refund status tool. This tool provides updates at three stages:
- Return received
- Refund approved
- Refund sent
Keep in mind that the tool only updates once per day and may not show progress during periods of extended processing. If your return is delayed due to a manual review, the tool might not provide detailed information. Despite its limitations, checking the refund status tool regularly can give you a general sense of where your return stands and alert you if any additional action is needed on your part.
Avoid Common Filing Mistakes
Preventing common mistakes can make a big difference in how quickly your refund is processed. Here are some frequent errors to avoid:
- Using outdated tax forms
- Filing with incorrect or incomplete information
- Forgetting to sign your return if you’re mailing it
- Omitting required schedules or attachments
- Claiming dependents who were also claimed on another return
Many of these mistakes can be caught by filing electronically. Most e-filing platforms check for common errors and won’t allow you to submit the return until they are corrected.
Consider Professional Help for Complex Returns
If you have a complicated tax situation, it may be worth consulting a professional. Individuals who are self-employed, own multiple properties, receive income from multiple states, or are claiming large deductions and credits can benefit from expert advice.
A professional preparer can help you file a correct and complete return, minimize the chance of audits or delays, and advise you on how to optimize your refund within the bounds of current tax law.
Respond Promptly to IRS Notices
If the IRS identifies a problem with your return, they may send you a notice requesting additional information or verification. Failing to respond in a timely manner can stall your refund indefinitely.
Read all IRS notices carefully and follow the instructions. If the notice includes a deadline, be sure to respond before it passes. If you’re unsure how to respond or what the notice means, contact a tax advisor or reach out to the IRS directly for clarification.
Maintain Copies of Your Tax Records
Keeping detailed records of your tax filings, including W-2s, 1099s, receipts for deductions, and IRS letters, is crucial for resolving any issues that may arise during processing.
If your return is selected for review or if the IRS sends you a notice, having your documentation on hand will make it easier to provide what’s needed quickly. It also helps ensure consistency year over year, particularly if you’re carrying forward losses or deductions.
Avoid Amended Returns if Possible
Filing an amended return should be a last resort, not a routine solution. If you discover an error after submitting your original return, wait to see if the IRS catches and corrects it first. In some cases, especially with the American Rescue Plan changes, the IRS automatically corrected returns and issued additional refunds.
Amended returns can take several weeks or even months to process and are reviewed manually. Filing one unnecessarily can delay your refund significantly.
Use Caution with Estimated Returns and Deductions
Guessing income amounts or rounding up deductions might seem harmless, but the IRS checks your return against third-party data and historical filings. Inconsistencies can raise red flags and result in delays.
Always use actual amounts from documents and receipts. If you’re unsure about a particular deduction or credit, do the research or seek advice rather than estimating.
Track Legislative Changes That Could Affect You
New tax laws and legislative changes can significantly impact refund processing. During the pandemic, multiple relief bills changed tax rules retroactively, causing widespread confusion and delays.
Staying informed about changes that apply to the current tax year helps you prepare accurately. For example, changes to child tax credits, income thresholds, or allowable deductions can all affect your eligibility and the amount of your refund. While no one can completely eliminate the risk of a delayed refund, the strategies outlined above can significantly reduce your chances of encountering problems.
What to Do if Your Tax Refund Is Delayed
Despite your best efforts to file early, accurately, and electronically, tax refund delays can still happen. While some delays are due to preventable errors, others stem from issues entirely outside your control. The IRS processes millions of tax returns every year, and even with automation and technological improvements, backlogs and bottlenecks persist.
If your refund is delayed, understanding the process and knowing what steps to take next can help you navigate the situation more effectively. From monitoring your return’s progress to dealing with identity verification and requesting help from the IRS, this guide outlines what to do when your refund doesn’t arrive on time.
Understand the Typical Refund Timeline
The IRS issues most refunds within 21 days of receiving a return filed electronically. If you filed a paper return, it could take six weeks or longer to process. However, if your return contains errors, requires additional review, or includes certain credits, such as the Earned Income Tax Credit or Additional Child Tax Credit, it may take longer. Certain refund claims are legally required to be held until mid-February. This requirement helps prevent tax fraud, but it also causes delays for taxpayers who qualify for these credits.
Understanding this baseline timeline is helpful before assuming that your refund is delayed. If it has been more than 21 days since e-filing or six weeks since mailing a paper return and you haven’t received your refund, it’s time to start looking into the issue.
Use the IRS Refund Tracking Tool
The IRS offers a tool called Where’s My Refund? which allows you to check the status of your return. This tool updates once per day and can confirm if your return has been received, approved, or if the refund has been issued.
To use it, you will need:
- Your Social Security number or ITIN
- Your filing status
- The exact refund amount claimed on your return
If the tool shows your return is still being processed after several weeks, it’s an indicator that something may require further investigation.
Review Your Tax Transcript
If the refund tool doesn’t provide enough detail, your IRS tax transcript may offer more insights. This document shows your return’s processing history, including when it was received, whether it was flagged for review, and whether a refund has been issued or adjusted.
You can access your transcript by creating an online account on the IRS website. Once logged in, you’ll be able to download your transcripts and look for transaction codes that indicate your return’s status.
For example, codes such as 570 (Additional Account Action Pending) or 971 (Notice Issued) can signify delays or that the IRS is reviewing your return. Understanding these codes can provide clues as to why your refund hasn’t been issued yet.
Common Reasons Refunds Are Delayed
There are several common reasons why a refund may be delayed:
Manual Review
The IRS flags returns for manual review when there are discrepancies or high-risk elements. This often happens when information on your return doesn’t match what the IRS has on file or when you claim certain credits.
Identity Verification
If the IRS suspects identity theft, they may send you a letter asking for verification. You will typically need to go online or call the IRS to complete the process before your return can be processed. Delays can last several weeks depending on how quickly you respond.
Incorrect or Incomplete Information
Errors such as an incorrect Social Security number, misspelled name, or mismatched income figures can trigger delays. Even if your return is accepted, the IRS may need additional time to resolve the inconsistencies.
Claiming Certain Credits
Returns that include the Earned Income Tax Credit, Additional Child Tax Credit, or Recovery Rebate Credit are more likely to be flagged for review. These credits often require more verification and increase the chances of a manual hold.
IRS Backlogs
Ongoing processing delays and staffing issues at the IRS continue to affect turnaround times. Millions of returns from prior tax years may still be pending, creating a backlog that slows down current-year refunds as well.
What to Do If You Receive an IRS Letter
If you receive a letter from the IRS, read it carefully. It will usually explain what action is needed and whether the IRS needs more information to complete your return.
Here are common types of IRS letters:
- Request for identity verification
- Notice of adjustment to your return
- Request for additional documentation to verify income or credits
Respond promptly and follow the instructions exactly. Delays can be extended significantly if you miss a deadline or fail to provide all requested information.
Contacting the IRS
If you’ve waited the appropriate amount of time and haven’t received your refund or a clear explanation, consider calling the IRS. Be prepared for long wait times, especially during peak filing season.
When calling, have the following information ready:
- Your Social Security number or ITIN
- Your filing status
- The exact amount of your expected refund
- A copy of your tax return
- Any IRS letters or notices you’ve received
You can also schedule an appointment at a local IRS office if you need in-person assistance. Some issues, such as identity verification, are best handled face-to-face.
Understanding IRS Codes and Notices
Learning to read IRS transcript codes and notices can help you understand your refund’s delay. Here are a few commonly seen transaction codes:
- 150: Return Filed
- 846: Refund Issued
- 570: Additional Action Pending
- 971: Notice Issued
- 902: Refund Frozen
If your transcript shows a 570 code followed by no further activity, your return is likely waiting for manual intervention. A follow-up code, such as 571 or 572, indicates that the hold has been resolved.
A notice with code 971 typically means the IRS is mailing you a letter. That letter may contain important instructions, so monitor your mail carefully.
Escalating Your Case
If your refund has been delayed significantly and you are facing financial hardship, you may be able to request expedited processing. The IRS will generally consider this only in cases of dire need, such as pending eviction or utility disconnection.
To request expedited processing, you will need to contact the IRS directly and provide documentation of your hardship. In some cases, your situation may be referred to the Taxpayer Advocate Service, which is an independent organization within the IRS that assists with serious tax problems.
The Taxpayer Advocate Service can help:
- If your refund is delayed and you’ve received no resolution from the IRS
- If you’ve experienced repeated issues year after year
- If the IRS’s actions (or lack thereof) are causing financial difficulties
You can request assistance by submitting Form 911 or by calling the service directly.
Avoiding Problems in the Future
While you can’t control IRS processing times, you can reduce the chance of delay by following best practices:
- File your return electronically and as early as possible
- Use direct deposit for your refund
- Accurately report all income and double-check personal information
- Save and review all IRS correspondence
- Respond quickly to any requests for additional information
Keeping records of your filing confirmation and refund status can also help if you need to follow up with the IRS. Having documentation ready speeds up the resolution process.
Don’t File an Amended Return Prematurely
Filing an amended return while your original return is still being processed can cause further complications and delays. If you notice an error or forgot to include something, wait to see if the IRS adjusts it automatically.
The IRS has the ability to make certain corrections internally, especially for math errors or incorrectly claimed credits. If an adjustment is made, they will send a notice explaining the changes.
Only file an amended return if the IRS has completed processing your original return and you have confirmed that a correction is necessary. Amended returns take additional time to process and are reviewed manually.
Monitor Future Tax Law Changes
Future legislative changes could impact refund timing, especially if they apply retroactively or introduce new credits. Staying informed about tax law changes helps you prepare your return accurately and reduces the risk of delays.
For example, changes to child tax credits, stimulus payment eligibility, or pandemic relief programs may require new documentation or affect how your return is reviewed. Being aware of these changes ahead of time ensures your return complies with the latest requirements.
Conclusion
Dealing with a delayed tax refund can be frustrating, especially when you depend on that money for essential expenses or financial planning. But understanding why delays happen, how to minimize your risk, and what to do if your refund doesn’t arrive on time can put you in a much stronger position.
From the significant backlogs caused by the COVID-19 pandemic to specific filing issues like mismatched stimulus payments, retroactive tax law changes, or the use of special credits, the reasons for refund delays are numerous and often complex. Fortunately, many of these issues can be avoided by filing early, e-filing instead of mailing paper returns, and ensuring all personal and financial information is accurate and complete.
If your refund is delayed, use the IRS’s tools to track your return, review your tax transcript for processing codes, and stay alert for any mailed notices that may require a response. In some cases, you may need to verify your identity or provide additional documentation. Responding promptly and correctly is critical to resolving the delay as quickly as possible.
For those who face prolonged issues or financial hardship, the IRS Taxpayer Advocate Service is a valuable resource that can help you navigate particularly challenging refund situations. Knowing when and how to escalate your case ensures you’re not left waiting in limbo without answers.
Looking ahead, staying informed about tax law changes and organizing your tax documents well in advance of filing season will help you avoid common mistakes. Each tax year presents unique challenges, but with careful preparation and awareness, you can increase the chances of receiving your refund smoothly and without delay.
A proactive approach to tax filing combined with a clear understanding of IRS procedures can help you regain control over the process and reduce stress during tax season. Here’s to better experiences, faster refunds, and fewer surprises in the years to come.