By Irina Ivanova Millions of tax refunds delayed
Americans who overpaid taxes on unemployment benefits this year will start to receive refunds this week, the Internal Revenue Service announced Friday.
Under the American Rescue Plan, workers who received $10,200 or less in unemployment benefits last year don t have to pay taxes on that money, as they normally would. However, Congress passed the law change in March, after millions of people had already filed their tax returns. As many as 10 million people potentially overpaid their taxes and could be in line for refunds, the IRS said Friday.
The agency has begun correcting those tax returns and issuing refunds. It s doing the work in phases, starting with single taxpayers with simple returns such as those who didn t claim children or refundable tax credits.
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The IRS has begun doling out refunds to those people that paid taxes on their 2020 unemployment benefits, which now under the American Rescue Plan excludes that compensation as taxable income. But for some taxpayers, those refunds will be smaller than anticipated if they receive a refund at all.
According to the IRS, over 10 million taxpayers who filed tax returns prior to when the 2021 American Rescue Plan was enacted by President Biden on March 11, were identified as paying taxable income on 2020 unemployment compensation.
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The IRS has begun doling out refunds to those people that paid taxes on their 2020 unemployment benefits, which now under the American Rescue Plan excludes that compensation as taxable income. But for some taxpayers, those refunds will be smaller than anticipated if they receive a refund at all.
According to the IRS, over 10 million taxpayers who filed tax returns prior to when the 2021 American Rescue Plan was enacted by President Biden on March 11, were identified as paying taxable income on 2020 unemployment compensation.
The American Rescue Plan allowed unemployed Americans to exclude $10,200 in 2020 unemployment compensation from their income when calculating their amount of taxable income. The $10,200 included taxpayers that filed single or married filing jointly with modified adjusted income levels of less than $150,000.
(Garnishment is a court order that allows for funds to be removed from someone s account.) This is no different than any other kind of government refund, said Janet Holtzblatt, a senior fellow at the Urban-Brookings Tax Policy Center.
Unemployment tax break
The American Rescue Plan waived federal tax on up to $10,200 of unemployment benefits, per person, collected in 2020.
Many taxpayers had filed their tax returns before this break became available. President
Joe Biden signed the relief bill on March 11.
The IRS is automatically issuing refunds to those who overpaid their federal tax liability as a result. The agency identified more than 10 million taxpayers who may be eligible.
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