An Enormous IRS Backlog is Keeping Stimulus Checks Out of Americans’ Hands

July 12, 2021 Topic: U.S. Economy Region: Americas Blog Brand: Politics Tags: EconomyIRSStimulus ChecksRepublicansPolitics

An Enormous IRS Backlog is Keeping Stimulus Checks Out of Americans’ Hands

The IRS has been affected by the abnormal circumstances tied to the coronavirus pandemic—just as many other businesses. Its employees have been forced to work remotely and the agency has faced a staffing shortage since before the pandemic. Predictably, this has resulted in delays.

 

The hot topic of a potential fourth stimulus check continues to be contentious on Capitol Hill. While a vocal minority of Democrats have supported such a measure, moderates have shied away, preferring to focus on more targeted payments and infrastructure investments. Republicans have uniformly opposed another stimulus measure, and while polls suggest that most Democrats support further stimulus checks, an increasingly vocal minority has begun to criticize them on the basis of their inefficiency and their possible negative effects on employment. 

From the most recent round of stimulus payments, passed in the March 2021 American Rescue Plan Act, roughly 90 percent of the payments have so far been made. That amounts to around $400 billion of the total $450 billion, which was set aside for that purpose. However, as the four-month anniversary of the first payments approaches, it is surprising that so many checks remain outstanding. Unfortunately, this is a function of the IRS’s enormous paper backlog, which has continued to build up well into 2021. 

 

In response to the pandemic, the IRS was assigned several additional tasks. In March, the agency was told to begin its distribution of the third round of stimulus checks. Next, in May, it was assigned its normal job—processing tax returns, and making refund payments when necessary. Finally, beginning in less than a week, it has been tasked with sending out the first of six Child Tax Credit payments to thirty-six million eligible American families. 

Under normal circumstances, this combination of tasks would be much to ask of any government agency. The IRS, however, has been affected by the abnormal circumstances tied to the coronavirus pandemic—just as many other businesses. Its employees have been forced to work remotely and the agency has faced a staffing shortage since before the pandemic. Predictably, this has resulted in delays.

The Taxpayer Advocate Service has reported that the IRS still has thirty-five million tax returns to process—half of which are previously processed returns that require further review, and half of which are new. While IRS employees work on this, they will be taken off of other areas of focus—ensuring, for instance, that contact information among Child Tax Credit recipients is accurate and up to date. 

Despite all of this, there is a reason for optimism. As in-person work renews, the agency is expected to become more productive, and President Biden has set aside billions of dollars to reinvigorate the agency. Still, if your stimulus or Child Tax Credit check comes somewhat late, this is likely the reason why

Trevor Filseth is a current and foreign affairs writer for the National Interest.  

Image: Reuters