Nearly 7 million tax returns haven’t been processed by the IRS because of stimulus changes

IRS office
Internal Revenue Service.

  • The IRS is behind in processing tax returns for nearly 7 million Americans.
  • Changes in the December and March stimulus bills account for the delay, as does a cut in IRS staffing.
  • Lawmakers have asked the IRS to extend deadlines and remove requirements on filing amended returns.
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President Joe Biden signed his $1.9 trillion stimulus package on Thursday, a win for many Americans who needed financial aid to recover from the pandemic. But that has slowed things down for the Internal Revenue Service to the extent that 7 million Americans are now waiting for tax refunds.

In December, Congress passed a $900 billion stimulus package that included $600 stimulus checks the IRS had to distribute. The more recent passage of the American Rescue Plan requires the agency to begin distributing $1,400 stimulus checks, and to field adjustments to unemployment benefits – a tax exemption on the first $10,200 of benefits – as well as a new child tax credit.

According to IRS data, 6.7 million tax returns have not yet been processed in 2021, but in 2020, only around 2 million returns faced processing delays, reflecting the effects of the stimulus changes.

IRS spokesman Robert Marvin told The Washington Post on Friday that while most refunds take 21 days to be issued after filing season starts, some refunds may take longer.

“Many factors can affect the timing of your refund after we receive your return,” Marvin said. “Some tax returns take longer to process than others. For example, returns with an error, incomplete information or those affected by theft or fraud may take longer to process.”

In addition, the Government Accountability Office found in a March 1 report that from 2010 to 2019, IRS staffing was down by almost 23% and its budget was cut by 20%, factoring into the processing delays that must be resolved manually.

“IRS’s overall 2020 performance was significantly impacted by its reliance on manual processes such as for paper returns, and its limited ability to process returns remotely while processing centers were closed,” the report said. “As a result, as of December 2020, IRS had a significant backlog of unprocessed returns and taxpayer correspondence.”

Democratic lawmakers have expressed concern with the backlog the IRS is experiencing, and the effects the backlog has on taxpayers who need their refunds to stay financially afloat. House Ways and Means Committee Chair Richard Neal and House Oversight Subcommittee Chair Bill Pascrell called for the IRS to extend tax filing season on March 8, citing the lack of help taxpayers were receiving from the agency.

More recently, 21 Democrats, led by Senate Majority Whip Dick Durbin, called on Friday for the IRS to remove the current requirement of an amended tax return for taxpayers who have already filed and want to account for tax relief in the stimulus bill.

“We recognize the challenges of implementing this change in tax law during filing season, particularly as millions of Americans have already filed their tax returns for 2020,” the letter said. “This underscores the need for Treasury and the IRS to take every action to ensure that all eligible individuals, including those who have already filed their 2020 tax return, are aware of and able to receive this critical relief.”

Biden’s stimulus plan included $1.9 billion in additional funding for the IRS, but the agency has yet to respond to lawmakers’ concerns on processing delays.

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Biden’s stimulus will lift US growth to 8% this year, Goldman Sachs says – without factoring in another $2 trillion spending package

Biden signs American Rescue Plan
US President Joe Biden signs the American Rescue Plan on March 11, 2021, in the Oval Office of the White House in Washington, DC.

  • Goldman Sachs lifted its 2021 US growth forecast to 8% from 7.7%, citing new stimulus for the boost.
  • The bank also expects Biden and Democrats to pass at least $2 trillion in infrastructure spending.
  • That sum could hit $4 trillion if the deal includes education, child-care, and health-care spending.
  • See more stories on Insider’s business page.

Goldman Sachs joined its Wall Street peers in revising its US economic outlook on Saturday, pegging an increasingly bullish forecast to Democrats’ latest stimulus package.

The team led by Jan Hatzius now expects US gross domestic product to grow 8% in 2021 on a fourth-quarter-to-fourth-quarter basis, according to a note published Saturday. That’s up from the previous estimate of 7.7%. The bank’s full-year growth estimate climbed to 7% from 6.9%.

The current-year projection largely hinges on President Joe Biden’s stimulus plan, as Goldman had initially expected a $1.5 trillion deal to reach Biden’s desk. The $1.9 trillion plan signed by the president on Thursday will accelerate the nation’s economic recovery through the middle of 2021 before tapering off into 2022, the bank’s economists said. Stimulus checks’ rollout over the coming months will concentrate the plan’s positive impact in the second quarter, they added.

Democrats’ stimulus package is probably the last major pandemic-era relief deal, but key tenets of the plan are set to be renewed as the economy climbs out of its virus-induced hole. The bill’s expansion of the child tax credit will probably be extended or made permanent by Democrats, according to Goldman.

The $300 supplement to federal unemployment benefits will expire as planned in September, but expanded eligibility and benefit duration policies included in Biden’s package could be prolonged, the team said.

Next stop: Infrastructure

Biden has said he aims to pass a massive infrastructure measure to further juice the US recovery. Such a plan will come with a price tag of at least $2 trillion, though details are scarce for now, Goldman said.Inclusion of funding for child care, health care, or education could push the sum to $4 trillion, though tax hikes would probably be needed to fund such a package, the bank added.

Biden campaigned on a $2 trillion package, though some Democratic senators indicate they favor even larger spending. Sen. Joe Manchin of West Virginia, an influential moderate member of the caucus, has said he could support up to $4 trillion, while Sen. Dick Durbin of Illinois, a member of party leadership, has said he could support $3 trillion.

Infrastructure spending would have a less pronounced impact on growth, but Goldman still sees the package driving a stronger expansion through 2022. The economy will expand 2.9% next year on a Q4-Q4 basis, up from the bank’s prior forecast of 2.4%.

House Democrats began planning their infrastructure push on Friday. House Speaker Nancy Pelosi said she hopes to hold bipartisan talks on improvements to broadband, energy, and education, among other sectors. Yet after passing the stimulus bill without a single Republican vote, garnering support across the aisle could be difficult.

Goldman’s update follows similarly optimistic changes elsewhere on Wall Street. Morgan Stanley lifted its forecast on Tuesday to 8.1% on a Q4-Q4 basis. US GDP will fully rebound to pre-pandemic highs by the end of the first quarter and trend higher in the coming months as the economy fully reopens, the team led by Ellen Zentner said.

Separately, UBS projected growth would reach 7.9% from Q4 2002 to Q4 2021 as stimulus, falling COVID-19 case counts, and continued vaccination opened the door for a strong recovery. The bank, like Goldman, had expected Republicans to water down the size of the latest relief package. Passage of the full bill can help consumer spending lift the ailing services industry into 2022, economists led by Seth Carpenter said in a note to clients.

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Some Senate Democrats eye changes to unemployment benefits and direct payments in the $1.9 trillion stimulus plan

Manchin vote a rama
Sen. Joe Manchin (D-WV) talks with reporters before a series of Senate votes known as vote-a-rama in the Capitol on February 4, 2021.

  • Some Democrats are pushing to change unemployment benefits and stimulus checks in the $1.9 trillion stimulus.
  • Manchin suggested a $300 federal jobless benefit ending in the summer; others want money for broadband.
  • Another Democratic senator said she favored lowering the income threshold for the new stimulus checks.
  • Visit the Business section of Insider for more stories.

Senate Democrats are up against a narrow timeline to approve a $1.9 trillion stimulus package and get it to President Joe Biden’s desk. But some Democratic senators are eyeing changes to key components of the legislation, particularly unemployment insurance and stimulus checks.

The jockeying among Democrats to amend provisions for direct aid comes as they attempt to enact the legislation by March 14, the deadline for when numerous unemployment measures expire, including a $300 federal benefit. They have only days to settle policy differences, and it may shape the course of the economic recovery.

Senate Majority Leader Chuck Schumer told reporters the measure could be advanced as early as Wednesday. Asked if he would support targeting some aspects of the bill, he responded: “We want to get the biggest, strongest, boldest bill that can pass. And that’s what we’re working to do.”

He said discussions were ongoing between the Biden administration and a group of nine Democratic senators that includes Sen. Joe Manchin of West Virginia; Sen. Jeanne Shaheen of New Hampshire; Sen. Mark Warner of Virginia; and Sen. Dick Durbin of Illinois, the second-ranking Senate Democrat.

The relief package would provide $1,400 stimulus checks for taxpayers; $400 in federal unemployment benefits through the end of August; $350 billion in aid to state and local governments; $200 billion in school funding; $50 billion for virus testing and tracing; and a major revamp of the child tax credit.

Biden called into a Senate Democratic lunch on Tuesday and urged lawmakers to approve the bill quickly. Sen. Tim Kaine of Virginia told reporters that “he got on and kind of gave us a rally call.”

Inside the group of nine

Manchin said Tuesday he supported a $300 benefit that would expire sometime in the summer.  He appeared to suggest the end of June as a possible end-date.

“I’m thinking by end of June, first of July we’re gonna have most people inoculated,” the West Virginia Democrat told reporters on Capitol Hill. “So by that time there should be doors opening up, ready to go.”

Shaheen indicated she supported designing a new pot of money for broadband and healthcare providers. “Those are two areas we’re really hoping to see additional funding,” she told reporters. 

She suggested those initiatives could be financed with a lower check income threshold for married couples and an extension of the federal jobless benefit at $300 instead of $400. 

The push to cut unemployment benefits encountered early Democratic resistance. “I oppose that. I don’t know if it will prevail, but I’m for $400,” Durbin told reporters. Still, he said he was open to restructuring a third wave of direct payments.

That part of the legislation is far from settled. Sen. Ron Wyden of Oregon, chair of the Senate Finance Committee, said he believed there was “growing support” for unemployment benefits to end in September. “I think we’re making a lot of headway,” he told reporters, without specifying further.

Other Democrats pushed back against the idea of restricting stimulus check eligibility. “I think the president has made it clear what his views are and I believe those will prevail,” Sen. Bernie Sanders, chair of the Senate Budget Committee, told Insider.

The House approved the package on Saturday, giving Democrats only two weeks to approve the legislation in the Senate, where it will likely be amended. A second vote-a-rama will occur on Thursday afternoon, kicking off a long amendment process which is expected to end with approval of the bill by the end of the week.

Then the amended bill must go back to the House for final passage before Biden can sign it into law.

Democrats are employing a process known as reconciliation to push the rescue package through without Republican votes. The legislation must adhere to strict budgetary guidelines so it can pass with a simple majority of 51 votes in the Senate, but the Democrats’ slim majority means they cannot afford to lose a single vote.

Republicans are slamming the legislation as a Democratic wishlist of unrelated priorities. “This is a wildly expensive proposal largely unrelated to the problem,” Senate Minority Leader Mitch McConnell told reporters on Tuesday. “We’ll be fighting this in every way that we can.”

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Some Democrats are ready to give up on demands for state and local aid to get a COVID-19 stimulus bill passed, report says

dick durbin chris coons amy klobuchar
Democratic Sens. Sen. Chris Coons (L) and Dick Durbin (R) in Washington DC in February 2018.

  • A number of Democrats have signaled they may drop demands for state and local government aid in a forthcoming COVID-19 stimulus bill, according to multiple reports.
  • The Associated Press reported that Dick Durbin and Chris Coons would back a slimmed-down $748 billion compromise deal which omits the support.
  • The bipartisan group trimmed off the parts that Republicans and Democrats had been finding hardest to agree on: state and local government aid, and legal protections for businesses. 
  • These now form part of a separate $160 billion proposal, which has less chance of passing. 
  • Durbin said: “I’m not giving up on funding for states and localities,” but said he backed the $748 billion proposal without them for now.
  • Visit Business Insider’s homepage for more stories.

Some senior Democrats are preparing to drop their insistence on immediate support to state and local governments in order to move a COVID-19 stimulus deal along, the Associated Press (AP) reported

Both Senate Democratic Whip Dick Durbin and Biden confidante Sen. Chris Coons signaled on Monday that they would back the scaled-back deal of $748 billion, the AP said.

House Speaker Nancy Pelosi continues to press for it to be included. 

The AP also noted that several Democratic figures attended the press conference announcing the smaller package, suggesting growing support. 

A bipartisan group of lawmakers who have spent the last weeks crafting a $908 billion relief proposal divided it into two sections on Monday in order to give some aspects a better chance to pass both the House and the Senate. 

The proposal now consists of a $748 billion proposal containing measures that are largely agreed on across the board, including support for education, vaccine distribution, and unemployment insurance.

A second, $160 billion proposal separates off the two most contentious aspects to be addressed: liability protections for businesses in the pandemic (demanded by the GOP) and support for state and local governments (demanded by Democrats).

The group – which includes Sen. Mitt Romney (R-UT), Sen. Joe Manchin (D-VA), and Sen. Susan Collins (R-ME) – dubbed their proposal a “Christmas miracle”.

Read more: Lawmakers just unveiled the text of their ‘Christmas miracle’ coronavirus stimulus. Here’s what’s in the latest attempt to provide relief. 

The proposal is being presented as a stopgap measure to get some support out over Christmas, with further negotiations expected when President-elect Joe Biden takes office. 

Meanwhile, Pelosi – who backed the bipartisan plan when it stood at $908 billion and contained provision for state and local aid – continues to press for it. She spoke to Treasury Secretary Steven Mnuchin by phone Monday evening about it, according to the AP. 

She had earlier suggested that she would be willing to compromise on business liability protections, as long as they do not harm workers’ rights. 

But that stance may be fading across the party.

In a statement emailed to media outlets, Durbin backed the $748 billion deal and said he was “disappointed” that state and local government funding couldn’t be agreed as part of it. He insisted he was not dropping the issue for good.

“This package does not include everything I think we need,” he wrote, adding: “I want to be clear: I’m not giving up on funding for states and localities.

“[…] While the fight continues over these issues, we must provide some emergency relief for the American people before we go home for the holidays.”

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