Delayed 2021 Tax Refunds

At the beginning of each year, millions of Americans spur into action to file their taxes – many fueled by fear of owing the IRS money or, more likely, motivated by receiving a tax refund. 

As hard as it is to believe, at least 10% of Americans are still waiting for their 2021 tax refunds or an audit correspondence from the IRS. Even harder to believe that out of this portion of people, their delayed 2021 tax refunds sat at a standstill, taking 6-10 months before reaching an IRS agent for processing.

The IRS explains this is due to the already existing backlog of paper returns from 2020, which IRS agents must process by hand. This backlog has been slowed and grown due to tax changes made in response to COVID-19 stimulus legislation and other errors seen with manually filing tax returns. Not only is the IRS struggling to get caught up with a previous year’s backlog, but they are also suffering the pain of the nationwide labor shortage, which means fewer agents to process incoming returns awaiting processes.

What Does a Delayed Tax Refund Mean to Me?

If you are 1 in 10 Americans still waiting for your refund, this is a silver lining! For tax refunds delayed more than 45 days, the IRS will pay 4% interest on the amount owed. Due to the unprecedented refund waits, the IRS announced on July 1 that the interest accrual rate is to be raised by 5%, compounded daily.

IRS Increases Interest on Delayed 2021 Tax Refunds

The only caveat to the interest is that it’s taxable—and will go back to the IRS. If you receive more than $10 added to your tax refund, you’ll receive Form 1099-INT from the IRS, and you’ll need to report the interest on your upcoming 2022 federal income tax return.

Avoid Delayed Tax Refunds – File with CPA Nerds

Connect today to CPA Nerds, and let us help you avoid a delayed tax return or report the accrued interest on your delayed 2021 tax refund!

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