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How tax brackets affect what you pay in income taxes
Why being taxed, say 22% of your income, is much more complicated than you might think. Here’s a breakdown of what you actually pay in income taxes.
2020 has been the year of remote work, and that has spread to the IRS as well.
The agency closed its offices earlier in the year when the coronavirus outbreak began. But now, as 2020 draws to a close, the IRS still has a large backlog of mail on its hands, and that includes roughly 1 million tax returns that it has yet to process.
Many tax filers submit their returns electronically, but some choose to go the old fashioned way and file returns on paper instead. In a normal year, that’s not a big deal, although it usually means waiting around twice as long for a refund (six weeks, versus three weeks for taxes filed electronically).
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But in 2020, it’s a nightmare for people waiting for their returns to be processed and the IRS itself, which has around 3 million unopened pieces of mail to contend with.
Problem with paper tax returns
The big problem with delaying the processing of tax returns is that most tax filers must receive a refund from the IRS every year, and there’s no reason to think 2020 will be an exception.
As such, many people are still waiting for refunds for returns submitted months ago.
And while the IRS has pledged to pay interest on overdue tax refunds this year, that may not be enough to lessen the blow of having to wait for that money during a pandemic.
Will a stimulus package further delay the processing of refunds?
Lawmakers are still trying to agree on a coronavirus relief program to follow the CARES law of late March, which allowed a first round of $ 1,200 stimulus checks. It is too early to know when a second stimulus agreement will be signed and whether it will actually include a monitoring cycle for direct payments.
However, if an invoice that includes these checks is accepted, the IRS may need to change direction to withdraw this money, further delaying the processing of unopened returns and the issuance of refunds associated with them.
That said, the IRS has a system in place to automatically send dunning payments, while paper returns must be sorted manually, so there may not be a huge impact if a second dunning round is approved.
A better way to file your taxes
Most years there won’t be a pandemic, and the IRS will be better equipped to process paper tax returns as they come in. But in the years to come, it pays to switch to e-filing if you’ve never taken this route before.
Not only are you less likely to make a mistake with an electronic filing, but you also won’t have to worry about losing your taxes in the mail. And the software you use can alert you to tax breaks or credits that you wouldn’t have thought to ask otherwise.
In the meantime, if you’re waiting for a refund on your 2019 paper tax return, there’s probably not much you can do to move the process forward. While the IRS has an online tool to check the status of your refund, it won’t help if your taxes are still in a sealed envelope in a crowded mail room. The IRS is committed to dealing with its backlog as quickly as possible – but what exactly that means remains to be determined.
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The Motley Fool is a USA TODAY content partner providing financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY.
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