U.S. Tax Refunds Plunge 32% in Slow-Moving IRS Filing Season

(Bloomberg) -- Just under a month into federal tax filing season, the IRS reported a 32% slide in the number of refunds sent out compared with last year, showcasing delays that have spurred Democrats to call for postponing the traditional April 15 deadline.

The drop-off in the number of refunds is partly a consequence of taxpayers filing nearly 12.3 million fewer tax returns so far this year compared with 2020, according to data released Thursday. The filing season, which began Feb. 12, started about two weeks later than usual, which has contributed to the slump.

The average refund size -- $2,990 -- has held relatively steady, only down $22.

The number of tax returns filed so far this year is down about 18% compared with a year earlier, and the IRS has processed nearly 25% fewer submissions so far. The figures include tax returns turned in as of March 6.

“The numbers of filings are down as are the related numbers of refunds because taxpayers began filing later than usual, but this is not surprising because there have been fewer processing days in 2021 compared to the same period in 2020,” the IRS said in a statement. “However, given the number of days the IRS has been open for processing, the number of tax returns filed each day is up sharply this year compared to 2020.”

The number of tax returns received is up nearly 12% and refunds issued are down about 4% when compared the same number of filing season days to the prior year, according to IRS calculations.

Key House Democrats have called for the Internal Revenue Service to delay the April 15 deadline and give taxpayers more time to file. Besides the disruptions from the pandemic, changes in tax law -- including some revisions President Joe Biden signed into law Thursday -- will mean some filers will have to wait for updated forms or resubmit their returns.

Delay Request

House Ways and Means Chairman Richard Neal and Representative Bill Pascrell asked IRS Commissioner Chuck Rettig earlier this month to delay the filing deadline, calling this year “the most important tax-filing season in recent memory.”

Rettig has repeatedly said that he doesn’t believe a delay is necessary this year. Last year, the IRS put off the filing deadline by three months to give taxpayers more time as the pandemic unfolded.

Among the changes included in the $1.9 trillion stimulus law is relief in the treatment of unemployment benefits. Individuals can now avoid taxes on up to $10,200 of jobless payments, which were previously fully taxable.

People who have already filed will have to submit an amended tax return to get a refund on overpaid taxes. Those missing some or all of the two stimulus payments approved last year -- the $1,200 passed in March or the $600 from December -- can also claim that money on their returns this year.

The call to extend the filing season also comes as the IRS has been handed another big task: processing a third round of direct payments to households, this time for $1,400 each. White House Press Secretary Jen Psaki told reporters Thursday that recipients could start seeing those payments in their bank accounts “as early as this weekend.”

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