As we get ready to kickoff the 2013 tax season in less than two weeks, the most common inquiry from
taxpayers seems to be: “But I still haven’t received my 2012 refund”? In a recent trend that has
infuriated taxpayers and tax preparers alike, the IRS has in many cases drastically delayed the issuing of
tax refunds. While taxpayers are still required to timely submit their 2013 tax filings, the IRS is taking its
time in issuing many outstanding refunds.
According to an independent taxpayer advocacy group, the increase in delayed refunds is a direct result
of the IRS intensifying its efforts to prevent identity theft. The IRS expanded the amount and types of
filters used to catch potential fraud and find false tax returns. In 2013, the IRS rejected or suspended
nearly 5 million suspicious tax returns, up almost 400% from 2012. Around ninety percent of the
“suspicious” tax returns were eventually deemed legitimate, after the refund had been delayed for
months. While the IRS attempts to resolve all identity theft cases within six months, it often takes closer
to a year to close a case and correctly issue the refund.
Other factors that cannot go unnoticed – as much as the IRS hopes it will – are the furloughs and
spending cuts. While the IRS insists that recent budget cuts have not caused delays in processing
returns, it seems to be an obvious factor in the IRS having issued 1.5 million fewer refunds as of May
2013, as opposed to the same time in the previous year. According to the National Treasury Employees
Union, the IRS’ budget has decreased in the last two years by almost $1 billion with 8,000 fewer
employees. In addition, hiring freezes and multiple federal furloughs inevitably resulted in further
While the IRS continues to deny that having fewer employees and working fewer days is not a cause in
delaying returns, it certainly seems that this would be a factor.
While an increase in identifying fraud would be an understandable reason to delay refunds, the
disappointing “success” rate certainly calls into question whether the new tactics are doing more good
For many clients, the fact that they will eventually receive their refunds – plus a relatively generous
interest rate – serves as little consolation for the powerless feeling of someone else withholding their
money. Other taxpayers are not appeased when told “misery loves company” and that many people are
in similar, fortuitous positions. Probably least reassuring is that the IRS recently announced for 2013
electronically filed tax returns, the refunds will no longer be issued in five to seven days as in the past.
Now the average time for “non risk” returns will be 14 days and “high risk” returns will be 28 days
(unless pulled for Examination). In other words, things could get worse before they get better…