Jan. 27 (UPI) — American businesses seeking tax relief over economic hardships brought on by COVID-19 are facing lengthy delays because of a backlog at the Internal Revenue Service, according to a report released Thursday.
The Government Accountability Office report says “the CARES Act changes contributed to a 276 percent rise in filings for carryback refunds from fiscal year 2020 to fiscal year 2021.”
The GAO was established in 1921, and investigates federal spending and performance.
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 applications for tentative refunds for net operating loss carrybacks and alternative minimum tax credit refunds.
Current guidelines typically require any refunds to be issued within 90 days. But the report, which reviewed IRS data, found the agency started to miss that deadline in September 2020. That trend continued right through 2021.
“Until effective preventative control activities and mitigation plans are put in place, IRS remains at risk of failing to issue tentative refunds for net operating loss carrybacks and AMT credit refunds in a timely way,” states the GAO report.
“These delays not only hold up the delivery of refunds to taxpayers, they also increase the interest costs the federal government must pay on such refunds.”
Interest payments are already costing the government millions of dollars.
“For fiscal year 2021, these Interest payments amounted to approximately $61 million on all carrybacks, of which applications for tentative refunds made up roughly 80 percent,” states the report.
The GAO recommends the IRS take steps to establish a “threshold to initiate mitigation activities” to ensure refunds are handled within the required 90-day period.