IRS Advisory To Defer Filing Causes Delay In 2023 Tax Refunds: Average Refunds Differ With States

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We are more than six weeks into the 2023 tax season and for millions, the tax refund is the most significant payment. After the financially draining holiday season, low and moderate-income individuals and families rely on that check to pay off their debts, stock up on their groceries, and even manage to save some.  

But this year the tax refunds have been delayed as the IRS advised residents of states that received inflation relief stimulus checks and tax rebates to wait for clarification from the IRS before filing their returns.

The IRS was initially undecided on the status of the state inflation relief stimulus payments. they could not decide whether the income from such sources should be clubbed together with other payments in deciding the taxable income of an assessed.

Finally, by February 10, close to three weeks after the tax season started on January 23, the agency clarified that the inflation relief stimulus checks and tax rebates will not be considered as income in filing federal returns.

Taxpayers who are expecting a tax refund file early to avail of the payments within the first quarter. The IRS realized that the initial round of taxpayers comprises majorly of individuals and couples who are awaiting an income tax refund.

The IRS also prides itself on sending out most refunds within three weeks of filing. But what happens if the tax refund gets delayed, upsetting the financial plans of many low and moderate-income families and further weighing them down under more debts and dues?  

One of the common questions that the IRS helpline faces is about the tax refund checks which never arrived for many. Moving in quickly to pay out the tax refunds is a concern for the US government and the premier tax agency.  Even as the IRS moved in to quickly send out the refunds, the time to check for errors and omissions is shortened. This leads to a situation of lack of accuracy and improper refunds.

To compensate for these inaccuracies, the government empowered IRS with more tools to increase accuracy in returns and tax refunds. The deadline for employers to send Form W-2, showing taxpayers’ wages and also the tax withholding paid has been moved up. The same is the case with Form 1099 which reports the payment to independent contractors. The deadline has been set for January 31.

Congress has also instructed the IRS to delay tax refunds that contain the Earned Income Credit and Additional Child Tax Credit. the IRS can only release these funds after February 15. The agency has said that taxpayers can expect their refunds by the first week of March 2023.

The two new instruction from the federal government indicates that for the 1st time ever, the federal tax agency will have both the time and sufficient information needed to scrutinize more tax returns before sending out the tax refunds.

But the process of delaying and questioning refunds is not something new for the tax agency. On the contrary, several programs of the IRS compliance hold tax refunds for millions of filers every year. and here are the reasons why your tax returns may get delayed.

Reasons Tax Refunds Get Delayed

The IRS issues tax refunds after the deduction of any previous due that the taxpayer owes to the agency or any other government organization. The IRS regularly takes your money to pay any federal income tax that you owe. And you get that information within weeks of filing your return.

The IRS sends a CP-49 notice, which indicates that it is taking payment for any taxes that the assessed owes. And if you think that your calculation is not in line with the calculation by the IRS, you can go for an amended income tax return and get the issue rectified. Thus you either correct the tax paid or contest any extra money the IRS might have charged you. It could be underreporting notice or a tax bill from an audit.

The Treasury Offset Program allows the agency to reduce to fully take your refund if you owe debts other than income tax, including non-tax debts such as federal payments, pending child support payments, state taxes, and repayment of unemployment compensation.

The IRS doesn’t entertain questions related to Treasury Offset Program debts or answer questions on this particular issue. Taxpayers can call up (800) 304-3107 for details. Spouses who are not responsible can receive their part of such a statement.

For those who have filed jointly along with their spouse, and the agency has charged you fully for the debts of your spouse, you are entitled to get back your share of the refunds immediately. You can also file an injured spouse claim using Form-8379 (Injured Spouse Allocation).

The agency can also hold on to your tax refund and ask you to furnish further information from you several other situations. Here it is not similar to an audit. But if you do not respond to the information within the deadline, it can lead to an audit.

Situation Where The IRS Holds On To Your Tax Return

The e-filing process of filing returns could catch many errors while filing and reject them outright during the filing process. But if you go for the old method of mailing in your returns, the error is more likely to be flagged at a later stage by the IRS instead of it being detected and eliminated at the onset.

Most of such errors are referred to as ‘math errors,’ Though the errors are not limited to arithmetical errors. If there is a mismatch in your Social Security Number or the information supplied of your dependent, the agency can change any related credits, such as the deduction of the dependent, the Earned Income Tax Credit of children, and the care credit of dependents. The IRS also changes the returns if you miss out on including the corresponding form or schedule to establish a credit or deduction.

If your return gets changed by the agency, IRS notice CP-21 is sent advising you to correct the error within two months. And if you fail to send in sufficient information or explanation, the change effected by the IRS stands.