2021 TAX REFUND
$10,200 exclusion: When will the IRS return the unemployment tax refunds?
The filing deadline for taxes in the United States has passed and millions, especially those who are unemployed, are now awaiting their return.
The American Rescue Plan passed by Congress in March made changes to the way unemployment benefits can be taxed. The bill included the “exclusion of unemployment compensation of up to $10,200 for individuals for taxable year 2020” to help support families who have seen falls in their income over the last year.
Who is eligible?
The IRS states on their website that in order to qualify one’s “adjusted gross income (AGI) must be less than $150,000. This threshold applies to all filing statuses and it doesn't double to $300,000 if you are married and file a joint return.” If an individual or family were to receive more than $10,200, or $20,400 (if married and filing jointly) in unemployment benefits, they are to be taxed as normal.
What if I submitted my taxes before the passage of the law?
Fret not. The IRS has automatically identified all those eligible for this exclusion and will adjust the tax return amount and distribute the correct payment. This process may take a bit of time but the IRS has stated that it expects to begin making these correction payments in May and throughout the summer. On 14 May, the IRS announced that they had begun to make these payments and had identified over ten million taxpayers who would have their returns adjusted.
The tax authority will begin by correcting simple tax returns, including those belonging to individuals “who did not claim children or any refundable tax credits.” Then it will move on to more complex tax situations.
Throughout the last year, the IRS has made a big push to encourage taxpayers to provide the agency with a bank account number so funds can be deposited directly. These payments will be issued through direct deposit if the information is available. If not, the receipts will receive a paper check to the address on file.
The millions that filed their taxes before the passing of the American Rescue Plan may also be eligible for additional benefits such as the Earned Income Tax Credit and others. When making the corrections to the taxable income portion of the return, the agency will also check to see if the taxpayer is eligible for additional benefits automatically.