It has been said that “waiting is the rust of the soul.”
For small business owners who are dealing with 2023 tax refund delays, the rust seems to only be spreading. Millions of people who filed taxes this year (for tax year 2022) have not yet received refunds that they’ve been expecting.
Why is it taking the IRS so long? And what can you do about it if you’re in this situation?
This post will explain what’s happening and give you some ways to either speed up the process or manage financially until that refund comes.
Tax Refund Delays in 2023
In August of 2022, Congress passed the “Inflation Reduction Act.” $80 billion of the money approved by that bill was allocated the IRS, and some of that was for improving their automated systems and hiring several additional employees…all with the goal of making the process of filing taxes faster and smoother.
So far, however, we have not seen either of those results. While most people have had their income tax returns processed successfully, many are still waiting for much-needed refunds to be delivered.
US News & World Report in an article titled “When To Worry If Your Tax Refund Is Delayed” gives several reasons why you could be experiencing tax refund delays in 2023.
- Return Errors – A return can be held up because of simple math mistakes, forgetting to sign, incomplete forms, incorrect SSN, etc. (things an experienced CPA can help you avoid).
- Income That Doesn’t Match – Your W-2 and 1099 information must be the same as the copies that the IRS has on file.
- Incorrect Direct Deposit Account Information – Your return may be completed and your refund ready to send, but if there is an error with your bank routing number or account number the IRS can’t deliver it.
- Suspected Fraud – If something looks fishy, the IRS will take extra time to check it out.
- Dependent Mistakes – Sometimes an older working child will file their own return at the same time you include them as a dependent on yours, which takes time to sort out.
- Other Outstanding Returns – If the IRS is still waiting on you to file an old return, don’t expect them to move forward with a current one.
- Paper Return Delays – Even though electronic filing is how most returns are handled now, many people still mail paper forms. That can take longer to move through the system.
IRS Refund Processing Issues
Those are all examples of things individuals do to delay their own returns. Any of those (and many others) can easily happen in any ordinary year.
Now we have to add the fact that the IRS has been dealing with a significant backlog of returns due to their own staffing shortages and system issues.
The IRS “newsroom” section of their website includes a regularly updated “Status of Mission Critical Functions”. According to the information there, they are experiencing delays due to returns that need to be corrected and a large amount of correspondence to be answered.
As of August 2023, they report that “We have processed all paper and electronic individual returns received prior to June 2023, and we are opening mail within normal time frames.” At this point, they still have 1.71 million unprocessed returns to do. 1.5 million of those need to be corrected in some way, and another 213,000 are paper returns that physically take longer.
Under normal circumstances, the IRS can usually process a return and issue any applicable refunds within 21 days of receiving all of your forms. But these returns are going to take quite a bit longer.
Sometimes they can simply correct obvious mistakes without having to contact the individual who sent the return. However, if there is something they cannot resolve internally that requires them to reach out to the sender that process of communication back-and-forth will add even more time to an already delayed refund.
Impact of Tax Refund Delays
If you find yourself waiting along with the rest of 1.71 million taxpayers with unprocessed returns, you are understandably wondering how these refund delays will affect your business.
We get it. It can be incredibly frustrating. You might be counting on that money to be able to pay some bills or make a new purchase that will help grow your company.
The impact of tax refund delays may be especially tough on rural small businesses including farmers who are already operating, in many cases, within tight financial margins.
Cash Flow Challenges for Rural Small Businesses
As pointed out in a recent article by PR Newswire (“Rural Entreprenuers Face Opportunities and Obstacles”), the challenges for rural small businesses often fall into 3 basic categories:
- Access to Capital – difficulty managing cash flow and accessing much-needed outside financing
- Access to Labor – few qualified entry-level workers in areas with lower populations
- Access to Connectivity – limited access to high-speed internet in rural areas
All of these things are directly affected by a rural company’s ability to maintain a strong cash flow. Without cash on hand it’s hard to pay bills and buy equipment, recruit employees by offering competitive pay, or update technology to be able to stay well-connected to the outside world.
Managing Finances During Refund Delays
As we wrote in another post on the topic of cash flow, it is “the lifeblood of your business. Without it, your business will never make it. But when your cash flow position is strong and healthy, you’ll be set to grow and thrive.”
Here are 4 winning strategies on how to manage cash flow in your business (even while you’re waiting on a tax refund):
- Keep your books up to date. – A good cash flow management service can help.
- Make it easy to get paid. – Less friction for your clients means you get much-needed money sooner.
- Be quick to deal with late payments. – Politely contact clients the first day they’re overdue. A simple reminder usually gets money in your account faster.
- Realize that you can only expect what you inspect. – Keep an eye on your finances regularly so there aren’t any financial surprises.
For additional help, we recommend these two articles from Ramsey Solutions:
Tax Planning for Farmers and Rural Businesses
Managing taxes can be a challenge for farmers and others who run rural businesses. You’re focused on taking care of crops and livestock or whatever product/service you provide.
Because a large number of our clients are in smaller communities (we operate branches of our CPA firm in 6 locations across West Tennessee), we understand what you’re going through and we can definitely help.
When you hire us, you get more than a tax professional. You get a taxpayer advocate. We have over 40 years of experience working with rural small businesses…making sure their income taxes are filed right and they get every tax return they’re entitled to. Schedule a call today to find out how we can help you too.
