July tax filers could face this IRS glitch — here’s what you need to know

A majority of Americans choose to file their tax returns electronically each year, but due to a glitch in the system related to the coronavirus stimulus check, some individuals may be required to file a paper return.

The tax filing deadline, which was extended by three months from April 15 to July 15 as a result of the virus pandemic, is fast approaching.

But some Americans are discovering they have no choice but to file a paper return for 2019 -- a bug caused by their use of the "Non-Filers" tool on the Internal Revenue Service's website.

The glitch was first reported by the Detroit Free Press.

The IRS created the tool earlier this year so that low-income people, homeless people and others who aren't required to file a tax return could provide the agency with their address or direct deposit information in order to receive the stimulus money, part of the $2.2 trillion CARES Act signed into law at the end of March.

The non-filers tool is intended for couples who earn less than $24,400 and individuals who earn less than $12,200, as well as those who are homeless.

The IRS said individuals who plan to file a 2019 return should not use the tool, warning that it could slow down the processing of the tax return and distribution of a refund.

However, some people who are regular tax filers used the non-filers tool to obtain the cash payment -- up to $1,200 for Americans earning less than $99,000 -- amid some trouble in trying to enter their information via the "Get My Payment" tool and now are running into issues as they try to file their returns ahead of the July 15 deadline.

One individual told the Detroit Free Press that the "Get My Payment" tool kept telling him he did not qualify or his information was not available for the stimulus payment, which he knew was incorrect. He then used the "Non-Filers" tool to enter his information; however, the IRS is now treating his information entered through the "Non-Filers" tool as his return and is rejecting his attempt to file an electronic return.

"If you used the IRS non-filer tool or filed a return with $0 or $1 of income, then you need to file a new tax return by U.S. mail instead of electronically with “Amended EIP Return” written or printed at the top," H&R Block said in an alert posted to its website on Friday.

If individuals filed their 2019 return with $2 or more of income, they should file their 2019 taxes using Form 1040-X to amend the return.

Tax returns must be mailed by July 15; if you do not file a return or request an extension by then, you could be hit with a financial penalty.

Americans who submit a paper return and are entitled to a refund may be in for a long wait.

In a report to Congress, the National Taxpayer Advocate said the IRS had a backlog of 4.7 million returns for the 2019 tax year as of mid-May because the agency had temporarily suspended processing paper returns.

That's because, during the pandemic, the IRS continued to process electronic returns and issued refunds via direct deposits. But when the agency directed most of its employees to work remotely in mid-March, it created a tremendous backlog of paper returns.

IRS Commissioner Chuck Rettig said that the IRS has 12.3 million pieces of mail, some of which include paper returns. The agency is processing roughly one million paper returns a week, he said.

As of June 26, the IRS had processed about 128.5 million returns, down 10.6 percent from last year. By comparison, it had received about 140 million returns, a drop of just 3.5 percent from the same time last year. The agency has issued roughly 93 million refunds so far, down 10.3 percent from this point in 2019.