Hope you had a Happy Tax Day. I’m still waiting for my refund.

I filed my 2019 individual income tax return electronically on May 1. The IRS owed me a refund so I also gave it the necessary direct deposit banking information. In pre-COVID-19 days. I would have received the money in a couple of weeks. But I’m still waiting. Ten weeks later.

I’m not alone. A Tax Policy Center colleague filed for his refund—electronically and with direct deposit—on April 14. He just got it last week.

The problem goes beyond a few grumpy anecdotes. The IRS’s most recent filing season report shows that as of July 3, direct deposit refunds were more than 11 percent behind the same time last year. That’s more than 10 million direct deposit returns and $27 billion less than last year.  

A challenging filing season

Of course, the IRS has had an extraordinarily challenging filing season. It sent home nearly all of its staff in the spring due to COVID-19 outbreaks in some of its offices and statewide stay-at-home orders. The agency also has been extra busy getting out 159 million stimulus payments that Congress authorized as part of the CARES Act in March.

Then, there are those truckloads of unopened mail, including millions of paper returns, that have been piling up. And millions more envelopes will be arriving over the next few days from last-minute filers and estimated tax payers who waited for the July 15 tax deadline.

But direct deposit electronic returns should be different. They normally are processed, well, electronically, without human intervention. Lack of staff to process returns should not matter since they are untouched by people. 

What is slowing things up?

The delay likely has at least two causes. The first, and most probable, is that IRS return processing algorithms routinely hold up millions of e-filed returns each year because they find some problem. Many are simple errors— a transposed digit here, a problem with a dependent there. They may reflect an inconsistency between an employer’s W-2 and the wage income reported by a taxpayer. Many of these red flags are false positives: There was no taxpayer mistake at all.

But every one requires human intervention. When a return is flagged, a returns processor must look at it. Most of the time, the reviewer just OKs the refund after a quick look, though a taxpayer may get a correspondence audit at some later date to clear up any problem.

And that’s the rub, of course. COVID-19 threw those humans far behind schedule. Says former IRS National Taxpayer Advocate Nina Olson (now executive director of the Center for Taxpayer Rights), “Everything goes swimmingly until your return gets stopped.”

Former IRS Commissioner Charles Rossotti has proposed using existing IRS taxpayer data to clear up many of these routine glitches automatically, without the need for staff review. But the IRS has not adopted that that idea.

Too many payments

The second cause of the delay may be the federal government’s inability to process the payments themselves in a timely way. Both refunds and the CARES Act payments are distributed by the Treasury’s Bureau of Fiscal Service. The Government Accountability Office found the agency has a limited ability to send tax-related payments. It seems the BFS could handle refunds after managing the far bigger task of making those stimulus payments. But perhaps not as fast as in past years.

There is something of an irony to all this: It may be that the chore of distributing those economic impact payments, which averaged about $1,800 per household, may have in some way held up direct deposit refunds that average about $2,900. These payments may be going to different households but still, it isn’t a great look for a government trying boost the economy in the midst of a severe slowdown.

It is nice to know some of the reasons why my direct deposit refund and millions of others are stuck in the system. But I’d rather have the money.