I returned a large 2019 refund check via Certified Mail, delivered to Kansas City Refund Inquiry Unit 12 weeks ago, to be applied to 2020. I included a letter explaining I was returning it to apply to the 2020 tax year. The refund occurred because I made an estimated payment last July that was marked 2019 by mistake. I was advised to return the check, and include a letter of explanation, by an IRS rep and was initially told it would take 4 to 6 weeks to be processed.
It is now over 12 weeks and the IRS system has no record of my check having been returned. I've phoned in multiple times and even met in person with the IRS. They "believe" it will eventually be processed and tell me they have delays due to COVID, but cannot give me any time-frame as to when it should be considered "lost" rather than "just waiting to be processed". I'm finding it hard to believe that there is a big backlog of returned refund checks waiting to be processed like there is a big backlog of tax returns. I am concerned that it may have been somehow been lost by the IRS, or that something went wrong in the processing that will never be resolved without intervention, but the IRS keeps telling me they have no way of contacting that department to check on it. I was even told that I shouldn't send a follow-up letter as it would only "add fuel to the fire" of their existing pile of paperwork.
At what point should the check I returned be considered lost (by the IRS, since I have proof of delivery), and a Refund Trace be done? My understanding is that a Refund Trace would ultimately result in a replacement check which won't solve it needing to be applied to 2020 as of last July, to avoid late estimated payment interest penalties, but I guess a replacement check would be much better than the money being totally missing from my account. What is the best way to resolve this? I absolutely need it resolved before I can file for 2020. Thanks.
Per the IRS,
It’s taking us longer to process mailed documents including:
We are processing all mail in the order we received it.
Do not file a second tax return or call the IRS.
In addition, there have been news reports that many millions of pieces of mail sat unopened at the IRS during last year's shutdown, are still being processed. So it looks like there are a lot of folks ahead of you. Next time, cash the refund check and make a payment directly on the IRS website.