The voices of Tax Policy Center's researchers and staff
Today’s advice: If you have not yet filed your federal income tax return, do not—repeat, do not—send the Internal Revenue Service a paper return—especially if you are expecting a tax refund or want a COVID-19 recovery rebate based on your 2019 income.
For the past two decades, the IRS has urged you to file electronically with the promise of quicker refunds than you would receive if you mailed in a paper return. And about 90 percent of individual income tax filers have done so. But that advice became more urgent last week when the IRS announced that it has temporarily stopped processing 2019 paper returns. And if you already filed a return and it has not been processed yet, be prepared to wait a long time for any refund.
Why the sudden urgency, or, for those who already filed, need for greater patience? After “evacuating” most of its staff two weeks ago as a safety precaution during the pandemic, the IRS announced last week that its processing center in Ogden, Utah—the last one still open—would be closed too.
And at yesterday’s Tax Policy Center event on tax policy during the pandemic, the IRS Deputy Commissioner for Services and Enforcement Sunita Lough revealed that even mail deliveries are on hold—all mail sent to the IRS is currently being warehoused in trailers because the volume exceeds the storage space available.
The IRS made the right decision to protect its workforce and to keep taxpayers safe. It should have done so earlier.
But the recent IRS actions created a problem for those who are now caught in refund and recovery rebate limbo. If they’ve already filed a paper return, the IRS tells them not to resubmit it electronically. And they can’t even contact the IRS for information about the status of their return. The IRS explicitly warns taxpayers not to write or call.
I don’t disagree with the overall message to file electronically. It is a lot more expensive for the IRS to process paper returns than those filed electronically. Electronically filed returns also have fewer errors, largely because software can correct arithmetic and transposition errors. Refunds come more quickly for those who file electronically too—especially if they opt to have the refunds directly deposited into their bank accounts.
But electronic filing can come at a cost for taxpayers. Except for those who can go to volunteer income tax assistance (VITA) sites or tax counseling for the elderly (TCE) programs or those eligible to use the much-maligned Free File program, tax filers generally must pay to e-file, whether they use commercial software or hire a tax preparer. And electronic filing requires a computer and internet access—a challenge right now for those filers who rely on computers at their now-closed public libraries. And most VITA and TCE sites are also shuttered (as they should be during the pandemic).
It is a conundrum. The safety of IRS employees, VITA volunteers, and the public demands those temporary closures. But the IRS can and should do more to notify taxpayers that they really need to file electronically this year and help them do so.
In the weeks to come, we will probably learn about other processing issues that may delay refunds and rebates for taxpayers, even for those who have already filed electronically. But for now, tax filers need to know one big thing: Put down your pen and paper. If you want to see either your tax year 2019 refund or a rebate based on your 2019 income any time soon, you must file electronically.
Posts and comments are solely the opinion of the author and not that of the Tax Policy Center, Urban Institute, or Brookings Institution.