Taxpayers that received unemployment and paid taxes on their benefits are being awarded a refund from the IRS. Optima Tax Relief highlighted the news of approximately 430,000 refunds paid by the IRS; more than $510 million dollars. This refund was specifically for the 2020 tax year.
What to do if you were overpaid by the IRS
The IRS has decided to allow taxpayers to keep the overpayments, but there is a caveat. The IRS will take the overpayment out of your next refund. While some taxpayers may receive the overpayment as a refund, if you have an overdue tax debt then the IRS will apply the overpayment to your balance. So far, as many as 16 million taxpayers were found to be eligible for the adjustment.
The American Rescue Plan Act (ARPA) 2021
In March, ARPA was enacted and excluded the first $10,200 in unemployment compensation per taxpayer. To identify the excludable unemployment compensation, the IRS began to review tax returns filed before the enactment of ARPA. The IRS has since issued over 11.7 million refunds, over $14.4 billion. Of those returns, 519,000 were affected by the latest corrections. 430,000 taxpayers received refunds of about $1,189.
Reviewing Returns
The IRS is nearly done reviewing and processing corrections, wrapping up with the most complicated returns. If your return was impacted, you will receive letters from the IRS within 30 days of the adjustment. The letters will inform you of what kind of adjustment was made (refund, debt payment, offset, etc.) with the amount.
Optima Tax Relief wants taxpayers to know that you likely won’t be required to act or call the IRS when a correction is made. Credit corrections that were affected by the exclusion. The additional child tax credit, recovery rebate credit, premium tax credit, and American Opportunity Credit are all included in these credit schemes.
Federal income taxes do not apply to unemployment payments
In 2020, the first $10,200 of unemployment benefits will not be taxed for most families. Anyone earning less than $150,000 in 2020 is eligible for this tax break. All filing statuses are subject to the same annual income limit.
Those who haven’t yet filed a 2020 tax return are allowed to remove the first $10,200 of total unemployment compensation from their income and pay tax solely on the remainder. The $10,200 exclusion for couples applies to each spouse.
The IRS is automatically modifying the tax return of any qualified taxpayer who has already submitted their tax return and declared their whole unemployment compensation as income. In May and throughout the summer, refunds will be provided as a result of this modification. It is possible that certain alterations may not result in a refund at all.
This article is a complete guidance for you, I hope it is going to inspire you gracelly. It might be very helpful in the future.
Good Luck Folks!
