FINANCE
The average tax refund in 2020 was nearly $1,000 and time is running out to claim yours
Time is running out to claim your 2020 stimulus check, which requires you to submit a tax return to the IRS for that year. Here is what you need to know.
As the year that the COVID-19 pandemic began to unfold, the federal government offered many benefits to support households, particularly those who were able to file an income tax return. The median refund during that year was $932, and if you have yet to file your return, you could be entitled to a major chunk of change.
A tax return must be submitted by Friday, 17 May, to receive a check.
Why were refunds larger for the 2020 tax year?
One benefit driving up the average size of refunds in 2020 were Economic Impact Payments, commonly known as stimulus checks, sent to millions by the federal government. On your 2020 tax return, you can claim the first of three stimulus checks sent in 2020 and 2021. The check sent in 2020 was worth $1,200 for those who met the income requirements.
What were the income requirements?
The payments were made to everyone earning under the income limits, which were set at an Adjusted Gross Income of $75,000 ($150,000 for married couples filing jointly), with the stimulus check value reducing in a tapered fashion up to a maximum of $99,000 ($198,000 for married couples filing jointly).
Smaller checks were sent to those with larger incomes, with a deduction of $5 applied for every $100 in income over the $75,000/$150,000 limit.
Changes made to the way unemployment benefits were taxed
Additionally, changes were made to how unemployment benefits were counted as income as millions more workers claimed these benefits after the pandemic led to a massive wave of layoffs. The American Reseuce Plan, passed in March 2021, made alterations to the tax code that effected the refund size for the 2020 tax year as well. The new law allowed “individual taxpayers to exclude up to $10,200 of unemployment compensation they received in the tax year 2020 only,” according to the IRS.
Filing a late return
Taxpayers have three years to submit a tax return and claim a refund; if they don’t, these funds become the federal government’s property. Those looking to submit a 2020 return should be aware that while the process is a bit more complicated because they must file a paper return, there are plenty of resources available to ease the burden. A good first step is to contact the IRS and explain your interest in filing a return to the representative. The agency can be reached at 800-829-1040 or 800-829-4059 for TTY/TDD.
You can also request the wage and income-related documentation you will need to submit your return by submitting IRS Form 4506-T(Request for Transcript of Tax Return).
If you are looking for a free electronic option to help you gather the correct paperwork, you can use FreeFileUSA.com, which will allow you to print all of the forms that the IRS requires you to submit to receive a refund.
Be aware that when filing a paper return, you may not hear back from the IRS for six weeks as they have a backlog that takes time to work through.