How The Debt Celling Debate May Be Delaying Your 2023 Tax Refund Payment

Despite the IRS saying they had a much smoother and more efficient tax season (see stats below), like millions of others I am still waiting for my tax return to be processed and see my refund banked.

Initially my refund was delayed beyond the standard 21 day processing timeline due to additional return (identity) reviews. After getting a notice 5071C from the IRS, I quickly completed my return verification and assumed that my refund would soon follow.

Unfortunately, after 3 weeks of successfully verifying my return they is still no sign of my refund status. I just keep seeing the following generic message when checking the IRS refund status tool.

Refund Still processing

Now there are lots of reasons a refund can be delayed or be lower than expected, but I checked and most of these don’t apply to me. So after doing some research and checking social media, I saw many taxpayers reporting delays with refunds after verifying their identity and seeing no obvious issues with their e-filed returns.

So one hypothesis is I have is that the IRS is purposely going slow and delaying larger than average tax refund payments this year for a specific, yet unofficial reason.

What is this reason? The answer is to preserve money so that Congress has more time to resolve the debt ceiling debate.

Because tax receipts make up over 80% of all government funding, by delaying refund payments the Treasury keeps more money on its balance sheet allowing it pay out other (more urgent) government obligations.

The IRS, which is under Treasury department, can easily and legally justify delays by saying additional reviews and processing is needed. Case in point, the additional 60-day review letters which seem to be getting more common.

Given that Congress could take weeks to resolve the debt ceiling impasse they need to preserve money and the above refund delay payment tactic has been used in past debt-ceiling fights. So I would not at all be surprised that the Treasury/IRS is slow rolling IRS refund payments again this year.

This would go a long way to explaining why tax payers with regular returns and no apparent identity or fraud issues are seeing delays in refund payments, well after the end of the regular tax season.

Leave a comment below with your thoughts.

Millions Continue to Wait for Their Return & Refund to be Processed

The IRS continues to release updated data on ongoing processing delays in its latest operations update. This includes the following key data points (as of the end of April 2023):

Nearly 4 million unprocessed individual returns from the current and past tax year that need some kind or review or correction. More than half (2.7 million) require error correction or other special handling, with the rest being paper returns that take longer to be waiting to be reviewed and processed.

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If the IRS needs more information or need you to verify your return further they will send you a letter. This could delay the processing of your return by up to 120 days depending on how quickly and accurately you respond, and how quickly the IRS can complete the processing of your return.

The exact timeframe varies depending on the type of issue. So expect that the IRS will keep processing returns well into the 2023 tax season. But the good news is that the IRS process individual tax returns for which refunds are due first, with returns reflecting tax owed getting processed last.

If you amended your return (1040-X), the wait times could be more than 20 weeks. The IRS still has nearly 1 million amended returns to process, with this number likely to go up in the next few months.

The IRS also had 2.5 million unprocessed Forms 941 (Employer’s Quarterly Federal Tax Returns) for business taxapayers.

Not surprisingly, the following are where taxpayers are seeing the most significant service delays:

  • Live phone support
  • Processing tax returns filed on paper
  • Answering mail from taxpayers
  • Reviewing tax returns, even for returns filed electronically

The only advice I can give is to be patient. The IRS continues to onboard new staff under the IRA act, recently announced 4,000 more staff were recently hired to fill critical customer service representative positions.

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