Family with Michelle Tracy and her late father, Colonel Lester Marlon Romain
Courtesy of: Michelle Tracy
Michelle Tracy lost her father at the start of the pandemic. However, the deferred tax refund prolonged the misery he and his family felt and kept them from closing.
Tracy’s father, Colonel Lester Romain, 91, died in early March 2020. As he named Tracy, 57, his executor, he filed his paper tax return on time in July 2020.
She and her three siblings were eager to secure a federal refund of $ 2,300 to finalize and close her estate, but Tracy is still working with her lawyer a year later.
“I promised my father before I died that I would take care of it for him,” said Tracy, who lives in Kinlon, New Jersey. “I’m trying to honor his legacy and the promise I made to him.”
More from Personal Finance:
Your tax return preparer may not be regulated. How can Congress change this?
Deferred Tax Refunds for Identity Fraud and Incentive Checks by Crossfire
Some parents still don’t know how the monthly child tax credit payment works.
Tracy’s family are among the millions whose tax refunds have been delayed this year.
By the end of the 2021 tax filing season, the IRS had processed 135.8 million returns, up from 145.5 million the previous year, according to the Taxpayer Advocate Service, an independent office within the IRS.
Taxpayer Advocate Service reported that part of the backlog was due to a high volume of returns with incentive payments and other credits requiring manual review.
But there were still 10.1 million unprocessed personal returns as of Aug. 20, according to the IRS. The agency’s website said returns requiring “special handling” by an employee can take up to 120 days to be processed.
“It has been very frustrating for our clients,” said Larry Harris, Certified Financial Planner and Director of Tax Services at Parsec Financial in Asheville, North Carolina.
These setbacks are common when there is a final tax return with refund, he said.
While final returns for deceased people can follow the same process for living taxpayers, Harris said there’s an extra step when a deceased taxpayer has a refund. This is because these returns include Form 1310, which must be filed on paper, which can cause additional delays.
“These situations create a lot of problems for customers as they wait for a refund to close the property,” Harris said.
Although many IRS offices have been closed due to COVID-19, Tracy has been called about once a month. However, she obtained little information about the pending refund from her father and eventually filed a complaint with the Taxpayer Advocates Service.
Still, there was no update even after checking the status through the Where’s My Refund tool.
According to the Taxpayer Advocate Service’s mid-year report, IRS tool usage jumped to over 483 million in May 2021, with millions of late refunds. However, many taxpayers couldn’t figure out when to expect their refund or what is causing the delay.
Additionally, the IRS received a record number of phone calls – over 167 million in the 2021 reporting season – and only 7% of taxpayers contacted an agent, according to the same report.
“I think it’s fair to say that this is a crisis that really needs some attention,” Harris said.
The IRS did not immediately respond to a request for comment.
According to the Center on Budget and Policy Priorities, since 2010, IRS funding has declined by 19%.
According to its FY2020 report, the agency lost more than 33,378 full-time employees between 2010 and 2020, and although it has increased its workforce since 2019, the workforce remains below 2010 levels.
President Joe Biden has called for $ 80 billion in IRS funding over the next decade to fight tax evasion. However, the Senate withdrew the $ 40 billion proposal from the infrastructure bill after the Republicans backed down.
Although the Senate Budget Resolution Framework mentions “IRS tax relief” offsets, it is not clear whether lawmakers will approve the billions in funding proposed by Biden.
After seeking advice from her personal accountant, Tracy finally learned that her father’s reimbursement had been reported for fraud due to concerns about identity theft.
This is a common problem with estates, said Mary Kay Foss, a chartered accountant and CPA professor at the CalCPA Education Foundation in Walnut Creek, Calif.
“With a property, [the IRS] I cannot speak to the deceased, ”she said. “And so when they deal with a third party, it seems like they’ve been very careful.”
Although Tracy filled out the necessary forms such as her father’s death certificate, trust and more, she had to resubmit documents, verify her identity, and visit her local taxpayer support center to prove her executor. .
Two weeks after her second visit, Tracy was delighted to receive a reimbursement check for $ 2,300 in the mail.
“I think the three hours I spent at the Taxpayer Support Office helped,” Tracy said in an email.
With a refund in hand, she said she had finally reached the last step of the process: working with a lawyer to close her father’s estate.
One of the problems with long-term estate closings is that the deceased’s estate can generate income. If assets exceed a certain threshold, the family may need to file another tax return, Foss said.
Since the IRS pays interest on deferred repayments, it may push some estates over the limit, depending on the size of the return.
However, Tracy has spoken to her lawyer and believes the interest she will receive from her father’s return may be less than the minimum.
“It’s kind of like the last haunting track of 2020,” Tracy said. “I think once we do that, we can put it in the rearview mirror once and for all.”
With so many losses during the pandemic, he fears other families may face similar challenges, but urged them not to give up.
“The screaming wheel gets greasy,” she said. “Call once a week to ask where your refund is and follow up on any requests for required forms or identification in a timely manner.”