After paying too much tax on unemployment benefits received last year, millions of Americans are still waiting for refunds. Many people who claim unemployment benefits were suddenly entitled to tax refunds due to adjustments made as part of Joe Biden's American Rescue Plan.
However, these tax returns are taking a long time to arrive. Simply said, there is a significant delay. The first refund payment was paid in late May, and further payments have been issued throughout the summer. Despite this, some people have yet to receive a dollar or any sign that a tax refund is on the way.
Why is the tax refund in unemployment benefits delayed?
As a result of the COVID-19 pandemic, the Internal Revenue Service (IRS) is overburdened. That's because, first, their employees have encountered employment challenges due to the pandemic, and, second, due to the different stimulus checks and refunds, they've had more workload than before. Postal delays have also caused a backlog at the IRS. "There are delays in the processing of COVID-19 mail," they admitted.
This is why the IRS is currently experiencing such huge delays. There are delays in delivering a variety of services, including refunds for unpaid taxes on unemployment benefits.
Per MARCA, you might get a tax refund in September if you paid taxes on your 2020 unemployment benefits when you filed your taxes this year. This is why: Due to the American Rescue Plan, which was enacted in March, the first $10,200 of 2020 unemployment benefits, or $20,400 for married couples filing jointly, is deemed nontaxable income.
The IRS has started making changes to tax returns and sending refunds for an average of $1,686 to eligible people this summer. If you're still unsure where your refund is, we'll show you how to look up information on your tax transcript online. We'll explain why an IRS TREAS 310 transaction on your bank account or an 846 code on your transcript is a warning sign.
How to check unemployment refund status?
According to the IRS, eligible people should have received Form 1099-G from their state unemployment agency, which will indicate the entire amount of unemployment compensation paid in 2020 in Box 1 of the form. If you didn't get one, you should go to that agency's website and request one. Some states may issue different forms based on the type of unemployment benefits you got, such as federal pandemic unemployment assistance or PUA.
Wait for the IRS's letter to people whose returns have been amended to see if a refund has been given. These letters, sent out within 30 days of the adjustment, will tell you whether the adjustment resulted in a refund or was used to pay down debt. The IRS advises against contacting them.
Although the IRS online tracker apps, such as the Where's My Refund tool and the Amended Return Status tool, may give information on your unemployment tax refund status, they may not provide information on the status of your unemployment tax refund. Viewing your tax records online is a quick method to determine if the IRS processed your refund. You can also obtain a copy of your transcript by mail or by contacting 1-800-908-9946, the IRS' automated phone service. Here's how to get an online copy of your tax transcript, according to CNET:
1. Log in to your IRS account at IRS.gov. If you haven't already done so, this will take some time because you'll have to go through many procedures to verify your identification.
2. The Account Home page will appear once you've logged in to your account. Select View Tax Records from the drop-down menu.
3. Click the Get Transcript button on the next page.
4. A drop-down choice will appear, asking why you require a transcript. Leave the Customer File Number box blank when selecting Federal Tax. To begin, press the Go button.
5. For the previous four years, the following page will provide a Return Transcript, Records of Account Transcript, Account Transcript, and Wage & Income Transcript. The 2020 Account Transcript is what you'll need.
6. This will bring up your transcript in PDF format: Pay special attention to the Transactions section. You're searching for an entry that says "Refund issued" and has a date in late May or early June.
There's still a good news!
An audit letter should specify the supporting papers you must submit, and you should have 30 days to do so. It's critical not to dismiss this communication, as the TAS warns, since the agency "will not make a second contact." The next letter you get might be a Notice of Deficiency, which you do not want.
There is some positive news to report: According to the National Taxpayer Advocate's most recent blog post, the IRS is preparing to launch an online service that will allow audited individuals to upload supporting evidence using their phone or computer. At the moment, the paperwork may only be sent by mail or fax.
The Document Upload Tool, as it's known, will not only make it easier for individuals to upload their papers, but it'll also speed up the entire resolution process, which means you'll get your refund sooner if you're due one, as per Fast Company via MSN.