If you got unemployment benefits last year, you could get a pleasant surprise this week. The Internal Revenue Service said on Wednesday that additional 1.5 million taxpayers will get refunds totaling more than $1,600 as a result of changes to previously filed income tax returns due to unemployment benefits.
On July 28, the IRS stated that another 1.5 million taxpayers received refunds totaling more than $1,600. The refunds are linked to the American Rescue Plan Act of 2021, which includes changes to unemployment compensation. One of the provisions was to exclude up to $10,200 in 2020 unemployment benefits from taxable income calculations when it became law on March 11, after many people had already filed their tax returns.
More than 8.7 million refunds totaling $10 billion have been given during four rounds of unemployment compensation readjustment refunds, Forbes reported. More tax returns are anticipated to be modified this summer, according to the IRS, which stated that it began with the simplest tax returns and is currently evaluating the more complex ones.
What to know about unemployment refunds
The IRS has already given more than 8.7 million unemployment benefits refunds worth more than $10 billion, with the fourth round of payments currently being sent out. The IRS began issuing refunds to individuals who got unemployment benefits in 2020 and paid taxes on them before the American Rescue Plan took effect in late May. Individuals earning less than $150,000 a year were exempted from paying taxes on up to $10,200 in unemployment insurance payments under that statute.
Per CNET, the first wave of these additional refunds went to individuals with the simplest returns, and more complicated returns are expected to receive batches over the summer. On July 13, the IRS said that it has made 4 million more payments through direct deposit and paper check, with 1.5 million more due on July 28. According to an igotmyrefund.com forum and another conversation on Twitter, some taxpayers who filed as head of household or married with dependents began getting IRS money in July or received updates on their transcript with dates in the coming weeks. Here's a rundown of everything you should know so far:
- Only individuals with an adjusted gross income of less than $150,000 are eligible for the tax break, as well as those who received unemployment benefits during the pandemic in 2020.
- The $10,200 is the refund amount, not the income exclusion level for single taxpayers. The amount of the refund varies by tax bracket, total income, and the number of earnings from unemployment benefits.The IRS is performing the recalculations in phases, starting with single filers who are eligible for a tax break of up to $10,200. It will then change returns for married couples filing jointly who are eligible for a $20,400 tax benefit.
- Your refund will be delivered directly to your bank account if you provided bank account information on your 2020 tax return.
- Your refund will most likely display as "IRS TREAS 310 TAX REF" if you have a direct deposit account.
- If you don't, the IRS will mail your return as a physical check to the address on file.
- Within 30 days of correcting, the IRS will send you a notification detailing the changes.
- The unemployment exemption is being implemented in certain states, but not all, for state income tax returns in 2020.
- To claim the exemption, most taxpayers do not need to file an updated return. However, if you believe you are now entitled to deductions or credits as a result of an adjustment, see the IRS's latest list of people who should file an updated return.
- If the IRS finds that you are due a refund for the unemployment tax credit, it will immediately amend your return and give you a refund with no more action on your part.
- A reimbursement will not be given to everyone. The IRS has the authority to confiscate a return to pay a past-due debt, such as unpaid federal or state taxes or child support.
- Refunds began to be issued in May and will continue to be issued in batches throughout the summer as the IRS analyzes tax returns. More complicated returns may take longer to process.
IRS sent "math mistake" notice
According to a report, the IRS has sent out more than five million incorrect math mistake notifications to Americans who have received relief payments. The notice may have been sent to taxpayers who claimed the Recovery Rebate Credit on their tax return last year.
Those who did not get the right amount for their first or second stimulus checks received it as part of their return refund. According to the Taxpayer Advocate Service, letters informing millions of individuals of a "math mistake" in that payment omit to mention that they only have 60 days to contest it.
Those who got the letter without the right information about the time allotted to argue the error will be granted extra time to evaluate. In the latest batch of refunds based on modified unemployment benefits, the IRS is expected to send checks to more than 1.5 million taxpayers this week, as per The Sun.
Based on their previously filed income taxes, those people are eligible to receive payments totaling more than $1,600. Individuals and married couples with an adjusted gross income of $150,000 or less can deduct up to $10,200 in unemployment from their taxable income under the America Rescue Plan.