IRS holding over 29M unprocessed tax returns, delaying refunds for many low-income Americans

The IRS is holding more than 29 million tax returns for manual processing, delaying refunds for many low-income Americans as the agency struggles to adopt a slew of coronavirus pandemic-related changes, according to its internal watchdog.

"As one would expect, IRS employees are stretched thin working through the manual processing of these returns," National Taxpayer Advocate Erin Collins wrote in a recent blog post. "So if a taxpayer’s return is pulled for manual processing, there will be delays."

At least 8 million returns have been placed in "suspense" until an IRS employee can review them to ensure the taxpayers received the fully promised stimulus check money. IRS officials are also calculating the earned income tax credit and the child tax credit – two tax credits for lower-income Americans that were expanded in President Biden's $1.9 trillion coronavirus relief package.

On top of that, 5.3 million 2019 or 2020 paper returns are awaiting manual processing, while 4.7 million returns have processing errors or fraud identification issues that require a response from the taxpayer. The IRS withheld 11 million business returns for manual processing.

"From a taxpayer’s perspective, it feels like their return has fallen into a black hole: they do not know what is going on, when they will get their refund, why it is being delayed, or how to get answers or help," Collins wrote.

That's because, in addition to a high volume of 2020 returns that need manual processing, the IRS is grappling with a massive backlog of processed 2019 paper tax returns and the herculean task of delivering millions of stimulus checks.