As we near the end of 2023, anticipation grows among taxpayers for the new year, yet many are still waiting for the IRS to resolve their pending tax queries from previous years. Here’s an update on the current scenario. The IRS has successfully managed both paper and electronic returns filed up to November 2023, and is dealing with mail in a timely manner. This means all individual tax returns up to the 2021 tax year have been processed, barring any that had errors or needed further review.
As of early December 2023, about 705,000 individual tax returns are still unprocessed. These include filings from the 2022 and 2021 tax years that require error corrections or reviews, as well as overdue returns from earlier years. Around 700,000 of these are waiting for error correction or special processing, and 105,000 paper returns are queued for review. Tax refunds for these returns may take longer than the usual 21-day window due to the need for manual intervention.
Status of IRS pending tax returns
For recent tax returns, the IRS is prioritizing those due for refunds, while returns indicating dues are processed later. Payments accompanying returns are processed immediately upon receipt. If a return has errors, it’s queued for manual review based on its arrival date. Some returns may undergo a second review. If the IRS needs more information or wishes to verify details, they will notify the taxpayer by mail. This process might extend beyond 120 days, depending on the taxpayer’s response and the IRS’s processing capacity.
Most refunds are processed within 21 days. However, paper returns may take longer, up to four weeks or more. The IRS’s “Where’s My Refund?” service is a reliable way to track the status of refunds. If additional information is needed for processing your return, the IRS will contact you by mail, but they cannot provide a specific refund date until your return is fully processed.
If you filed a paper return over six months ago and haven’t seen any update on “Where’s My Refund?”, it might be wise to refile electronically, ensuring all documents are properly signed and included. However, avoid refiling if your situation doesn’t match these criteria to prevent confusion at the IRS.
By December 2, 2023, the IRS had 680,000 unprocessed Forms 1040-X (amended returns). These are being processed in the order they were received, and the timeline may exceed 20 weeks. Duplication of submissions should be avoided to prevent adding to the backlog.
The IRS is working through an inventory of 508,000 unprocessed Forms 941 (Employer’s Quarterly Federal Tax Return) as of early December 2023. Additionally, around 1.03 million Forms 941-X (Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund) are pending. Processing of these forms, especially those involving ERC claims, has been slowed down, with a moratorium on new ERC claims set to last until early 2024.
Actions on ineligible ERC claims
The IRS has begun sending over 20,000 letters to taxpayers with disallowed ERC claims, focusing on those who applied but didn’t receive the credit. This is part of their increased scrutiny of ERC claims. The standard processing times for existing ERC claims have been extended, with potential delays in cases that require further review or audit.
The IRS is currently processing Forms W-7 (Application for IRS Individual Taxpayer Identification Number) submitted in November 2023. Applicants will be notified once their ITIN is assigned or if additional information is required.
With the IRS processing over 95,000 applications for tax-exempt status annually, they are currently reviewing submissions that are over six months old.