What to Know About IRS Unemployment Refunds
It hasn’t been easy to be unemployed, with Federal Enhanced Unemployment Benefits running out, but you soon …
It hasn’t been easy to be unemployed as enhanced federal unemployment benefits soon run out, but you could soon have some unexpected money straight to your bank account or mailbox. No, not a fourth stimulus check, but a tax refund on 2020 unemployment benefits.
If you’ve heard of it but want to know more, we’ll cover it all.
[READ: How Long Does Unemployment Last?]
What are the unemployment reimbursements?
In a nutshell, if you received unemployment benefits in 2020 and paid taxes on that money, you will get some or all of those taxes back by direct deposit or by mail.
The American Rescue Plan Act of 2021 was passed by Congress and enacted by President Joe Biden on March 11. One of the provisions of the plan was that unemployment benefit taxes of up to $ 10,200 would be waived for people earning less than $ 150,000 per year. year.
The IRS has already sent 8.7 million refunds totaling more than $ 10 billion, but an additional 1.5 million taxpayers will receive refunds in August. More taxpayers will receive money throughout the year.
The amount you will receive depends on the amount you paid in taxes on your unemployment income in 2020. According to the IRS, the average refund is $ 1,686.
Do I have to declare the unemployment income refund on my taxes next year?
No, says Mark Steber, director of tax information for Jackson Hewitt. “This is a tax refund, and federal refunds are not reported as income on the following year’s federal income tax return,” he says.
You may, however, want to speak with a tax professional to find out if your refund will affect your tax return, suggests Steber.
Steber says Jackson Hewitt has had clients who thought they would receive $ 10,200 from the IRS, which they don’t.
“People didn’t realize that the non-taxable amount was a reduction in taxable income, which usually results in a refund,” says Steber. “People’s misunderstanding on this tax issue has also created confusion with state income tax returns. Each state manages taxes in its own way, making state income tax a confusing mess for most taxpayers. ”
Will unemployment benefits be taxable this year?
“Yes,” Steber said. “At present, unemployment benefits are fully taxable on the 2021 tax return.”
In other words, it could change, but don’t count on it.
Steber has more tips for unemployed people who are concerned about how it will affect their taxes.
“If taxpayers perceive unemployment until 2021, we recommend that they do a mid-year tax audit now so that they can be sure they fully understand their tax situation before the end of the year or the time comes. to file 2021 taxes, ”Steber said. “Taxpayers shouldn’t forget either: you can have 10% of unemployment withheld as income tax, which is a big help when filing income next year. ”
[Read: How Are Unemployment Benefits Taxed?]
If I haven’t received an IRS payment, will I receive one in August?
Not necessarily. It really depends on the complexity of your tax return.
“The IRS split the refund releases and started with easy tax returns in May, then added about a million more returns in June and again in August,” Steber said. “Later versions deal with more complex tax filing situations. The IRS expects all unemployment refunds to be completed by December of this year. ”
How do I know if the IRS will send me an unemployment refund?
You might be lucky to go to the IRS website and use their Where’s My Refund? tool. Also check out the IRS Get Refund Status page, suggests Salvador Gonzalez, tax expert and professor of accounting at Walden University.
“As the IRS has experienced a large number of calls for stimulus payments and similar queries, taxpayers may want to use the IRS online form before trying to call them directly,” Gonzalez said. But if you do decide to call, don’t give up easily.
“Persistence is the best way to get information and advice on possible next steps,” he says.
If I owe an unemployment refund, why haven’t I received it?
In addition to having a complex tax form, you may need to file an amended tax return.
“While the majority of people who are owed a refund for the unemployment compensation adjustment of $ 10,200 will have their return automatically adjusted for the adjustment, the IRS specifically said certain groups should change their statements for the adjustment, ”said Logan Allec, a Los Angeles-based Certified Public Accountant and founder of the personal finance website Money Done Right.
[Read: How to Get the Biggest Tax Refund This Year.]
There are a few cases in which taxpayers must file an amended return, according to the IRS website:
– If you “have not submitted a Schedule 8812 with the original return to claim the additional child tax credit and are now eligible for the credit after exclusion from unemployment benefit”.
– If you “have not submitted an EIC Schedule with the original return to claim the Earned Income Tax Credit (with qualifying dependents) and are now eligible for the credit after excluding the ‘unemployment benefit’.
– If you think you are eligible for other credits or deductions. “Be sure to include any required forms or schedules,” according to the IRS website.
Still, most people, if they need to be paid back, are likely to have nothing to do and automatically receive their funds, so there’s no need to stress just yet.
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What to Know About IRS Unemployment Refunds originally appeared on usnews.com