Three IRS Delays Are Hitting Americans Abroad, the Taxpayer Advocate Warns
If your refund is stuck or a penalty looks wrong, the National Taxpayer Advocate’s new report explains why, and one fix has a July 10 deadline.
If your IRS refund is stuck this year, you are not imagining it, and the National Taxpayer Advocate just put numbers to why. In her Fiscal Year 2027 Objectives Report to Congress, released June 24, 2026, Advocate Erin M. Collins called the 2026 filing season “largely successful,” with roughly 139 million returns processed and an average refund of $3,275, yet she was blunt that taxpayers who fell outside automated processing often could not get help. The report summary on IRS.gov describes a “digital-first” agency that, in her words, “must not become a digital-only” one. Three of the problems she names land squarely on U.S. taxpayers overseas, and one carries a July 10 deadline. Here is what each one means.
| Finding | What the report says | Who is most exposed |
|---|---|---|
| Paper refund delays | Refund delays of 6 weeks or more; ~4 million notices for missing or invalid direct deposit info | Filers who cannot use direct deposit, including “taxpayers residing overseas” |
| Identity-theft backlog | Cases take close to 2 years; 500,000+ are still open | Anyone whose refund was frozen by an IRS identity filter |
| Kwong refund window | Listed as the top FY2027 objective; refund claims close July 10, 2026 | Anyone who paid COVID-era penalties or interest, from 2019 to 2022 |
Paper Refund Checks Are Stuck Six Weeks or Longer
The shift to electronic payments left paper-check filers behind. Under Executive Order 14247, the IRS pushed refunds toward direct deposit but did not set up clear procedures for the millions who cannot use it, including, in the report’s own words, “taxpayers residing overseas.” By late April, the IRS had issued about 4 million notices to filers with missing or invalid direct deposit information, and many affected taxpayers faced refund delays of six weeks or more. That is the machinery behind the CP53E notices many expats received this year, and it is one reason the IRS is phasing out mailed refund checks altogether.
Identity-Theft Victims Are Waiting Nearly Two Years
The report calls the delays for identity-theft victims “unconscionable.” Cases now take close to two years to resolve, and more than half a million were still pending at the end of the filing season. Overseas filers who trip an IRS identity filter, often through a CP5071 identity-verification letter, sit in that same queue, with a refund frozen until the case clears.
The Kwong Refund Window Closes July 10
The report’s first FY2027 objective is to protect refund rights in Kwong v. United States, the COVID-era penalty case. If the ruling is affirmed on appeal, taxpayers who paid late-filing or late-payment penalties or underpayment interest during the disaster window may be owed refunds. The claim itself is not automatic, and the window to preserve it closes July 10, 2026. Our guide to the Kwong refund deadline walks through the steps for filing Form 843 for a protective claim.
What These Delays Mean for Americans Abroad
The through-line is that automation now handles simple returns well, and everyone else waits. If your situation needs manual review, a paper check, or an identity release, the report confirms the delay is systemic, not a mistake unique to your file.
Two of the three have practical workarounds, and understanding your refund options as a taxpayer abroad can shorten the wait. The Kwong window is the time-sensitive one. Say you are a retiree in Portugal who paid roughly $1,400 in late-payment interest on a 2020 return filed during the pandemic. Under the Kwong reasoning, interest may be refundable, but only if a protective claim is on file by July 10. Miss it, and the window closes even if the IRS later loses the appeal.
These delays hit hardest if you are:
- A retiree or unbanked filer abroad who relies on a mailed check because the IRS will not deposit refunds into a foreign bank account.
- Anyone whose refund was frozen by an identity filter and is now waiting months for release.
- A late filer or streamlined filer who paid COVID-era penalties on a 2019 through 2022 return.
- A self-employed expat who paid underpayment interest on estimated-tax shortfalls during the pandemic.
What You Should Do Next
- Check your refund status in your IRS Online Account before calling. The report shows that most IRS phone lines answered only a fraction of calls this year.
- Pull your account transcripts for tax years 2019 through 2022 to spot COVID-era penalties or interest that may qualify under Kwong.
- File a protective claim before July 10 if those penalties appear, using Form 843.
- Respond promptly to any CP53E or CP5071 notice so your file does not stall further in the backlog.
If any of this applies to you, our team can pull your transcripts, confirm which penalties fall inside the window, and prepare a protective claim well before the deadline.
Confused by an IRS notice this year?
The information in this article is for general informational purposes only and does not constitute tax, legal, or financial advice. Tax rules are complex and change frequently. Consult a qualified tax professional regarding your specific situation before taking any action.
