The IRS is playing a massive game of catch-up at the moment, now that we’re more than a month beyond this year’s extended federal filing deadline of May 17 — the date that was chosen to give people more time to finalize their taxes as a result of ongoing complications related to the coronavirus pandemic.
To get a sense of how backed up the IRS is, the tax agency says that as of June 23, 2021, it had 17.5 million unprocessed individual federal tax returns in the pipeline still needing to be dealt with. “Unprocessed returns include tax year 2020 returns such as those requiring correction to the Recovery Rebate Credit amount or validation of 2019 income used to figure the Earned Income Tax Credit (EITC) and Additional Child Tax Credit (ACTC),” the IRS notes on its official website. “This work does not require us to correspond with taxpayers but does require special handling by an IRS employee, so, in these instances, it is taking the IRS more than 21 days to issue any related refund.” And speaking of refunds, some people could actually get a second refund this year, on top of the normal refund they might receive once the IRS processes their tax return. In this post, we’ll take a closer look at the IRS unemployment refund, made possible by the $1.9 trillion American Rescue Plan from back in March.
That legislation excludes up to $10,200 in unemployment compensation from being taxable for 2020. Given the extraordinary nature of the pandemic year we all lived through, the thinking behind including this benefit in the stimulus bill was that people should get a break on jobless income being taxable, like it normally is. And so, the IRS is giving back a portion of what the tax agency might have collected from you via refunds this spring and summer.
However, there’s a problem — a not insignificant number of people had already filed their federal tax returns, listing the jobless income they received, before the stimulus legislation was passed. That means the IRS is having to go back in and adjust those tax returns, sending out additional refunds, post-adjustment, as necessary.
Here’s one of the latest updates along these lines from the IRS:
Earlier this month, the tax agency sent out more than 2.8 million refunds, to taxpayers who’d initially paid taxes on their unemployment compensation before the American Rescue Plan changed things.
“IRS efforts to correct unemployment compensation overpayments will help most affected taxpayers avoid filing an amended tax return,” the IRS noted in a news release. “So far, the IRS has identified 13 million taxpayers that may be eligible for the adjustment. Some will receive refunds, which will be issued periodically, and some will have the overpayment applied to taxes due or other debts. For some there will be no change.
“The American Rescue Plan Act of 2021 (ARPA) excluded up to $10,200 in unemployment compensation per taxpayer paid in 2020. The $10,200 is the maximum amount that can be excluded when calculating taxable income; it is not the amount of refunds.”
Importantly, the IRS seems to be a little behind on issuing the next set of these refunds. The agency said in that news release that it planned to do so in mid-June, but obviously that window has come and gone.
“The review of returns and processing corrections will continue during the summer as the IRS continues to review the simplest returns and then turns to more complex returns,” according to the IRS. “Taxpayers will receive letters from the IRS, generally within 30 days of the adjustment, informing them of what kind of adjustment was made (such as refund, payment of IRS debt payment or payment offset for other authorized debts) and the amount of the adjustment.”Today's Top Deal Super-popular TP-Link Kasa mini Alexa smart plugs just hit a new all-time low price of $6 each! List Price:$26.99 Price:$23.99 You Save:$3.00 (11%) Available from Amazon, BGR may receive a commission Available from Amazon BGR may receive a commission