Tax Relief

IRS backlog inflicting lengthy delays in COVID-19 tax break funds

Commissioner of the Internal Revenue Service Charles Rettig. A Government Accountability Office report released Thursday said IRS backlogs are causing long delays in issuing refunds to businesses seeking financial relief due to COVID-19. Pool Photo by Tom Williams/UPI | license photo

Jan 27 (UPI) – American companies seeking tax breaks over the economic hardships caused by COVID-19 are facing lengthy delays due to a backlog with the Internal Revenue Service, according to a report released Thursday.

The Government Accountability Office report states that “the amendments to the CARES Act contributed to a 276 percent increase in claims for refunds from FY2020 to FY2021.”

Established in 1921, the GAO examines federal spending and benefits.

The CARES Act and other COVID-19 relief laws are designed to help businesses reduce some tax obligations, which can result in cash refunds in certain cases.

The IRS backlog includes requests for interim refunds for net operating loss carrybacks and alternative refunds of minimum tax credits.

Current policies typically require all refunds to be issued within 90 days. However, the report, which reviewed IRS data, found that the agency began missing that deadline in September 2020. This trend continued into 2021.

“Until effective preventive control measures and mitigation plans are in place, there remains a risk that the IRS will not timely issue interim refunds for net operating loss carrybacks and AMT loan refunds,” the GAO report said.

“These delays not only delay the delivery of refunds to taxpayers, they also increase the interest cost that the federal government must pay for such refunds.”

Interest payments are already costing the government millions of dollars.

“For fiscal year 2021, these interest payments totaled approximately $61 million on all carrybacks, of which requests for interim refunds accounted for approximately 80 percent,” the report reads.

GAO recommends that the IRS take steps to establish a “mitigation action threshold” to ensure refunds are processed within the required 90-day timeframe.

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