Many people use their annual tax refund as a type of forced savings each year. There’s nothing worse than filing your annual tax return and finding out you owe the government money. So, it is common for people to over-withhold to avoid that potential problem, and then have a lump sum of money from the refund.
However, if you did that in 2019, you may be in for a surprise. As of March 5, 2021, the IRS still had 2.4 million 2019 tax returns that it had not yet processed. That is especially problematic since 2020 tax returns have begun being filed. While it might make sense for the IRS to complete one year before starting on the year tax year filings, this will not be the case. The IRS has already begun processing the 2020 tax returns and issuing refunds.
So, what do you do if you are still waiting for your 2019 tax return to be processed? Just expect to wait. The IRS does not expect the backlog to affect getting your 2020 refund processed, even though the deadline to file 2020 tax returns has been extended to May 17, 2021. Those waiting for their 2019 tax refund will just have to wait.
This can be problematic in the context of filing for bankruptcy. Tax refunds are often an asset that will be seized for the benefit of creditors in a bankruptcy case. If you are still waiting for a 2019 tax refund, but you also are considering filing bankruptcy, that too may have to wait. Even though the refund has been delayed through no fault of the taxpayer, if that person files bankruptcy, they may lose that refund. Ordinarily, it is wise to simply wait until the refund is received and then make plans to file a bankruptcy. However, with the uncertainty of when the refund might be received, filing bankruptcy might be pushed off indefinitely.
If you have questions about filing bankruptcy, contact W M Law today.