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IRS: Americans receive tax refunds totaling $14.8 billion; When will you receive yours?

Twelve million American taxpayers who paid tax on their unemployment benefits in error during the 2020 tax year have now received tax refunds from the IRS.

The government stated in a news release that a total of $14.8 billion was distributed, which indicates that the average return was worth about $1,232.

IRS Tax Refunds 2023

The American Rescue Plan Act of 2021, which exempted unemployment benefits from federal income tax if they were less than $10,200 and the recipient’s annual total income was less than $150,000, is responsible for the refund.

Some taxpayers received refunds, while others had the excess funds applied to past-due taxes or other bills. The money would be returned by direct debit if the refund option was chosen at the time of filing the return.

In 2020, when the pandemic caused joblessness on a magnitude not seen since the Great Depression, about 40 million people received unemployment benefits. The typical recipient of benefits received $14,000.

The issue arose because many Americans had already submitted their tax returns for that year, even though President Joe Biden did not sign the legislation into law until March 2021.

The majority of states and the federal government typically count unemployment benefits as taxable income.

Although the IRS began processing the adjustment as early as May 2021, those who had complicated tax returns, such as married couples who filed joint returns but each member separately got unemployment benefits that year, were delayed from receiving compensation.

The IRS wrote refund-eligible taxpayers a letter advising them of the correction, which the IRS suggests storing for record-keeping purposes.

According to the IRS, the American Rescue Plan Act of 2021, which went into effect in March 2021, exempted up to $10,200 in unemployment benefits for 2020 from taxable income computations (up to $10,200 for each spouse if married filing jointly).

Individuals and married couples with modified adjusted gross incomes under $150,000 were eligible for the exclusion.

Some households became eligible for additional income-based tax credits as a result of the federal tax exemption, including the earned income tax credit, the recovery rebate credit, the additional child tax credit, the opportunity tax credit, and the premium tax credit.

Some taxpayers, however, might not have received the correct credit as a result of the revision. Taxpayers who feel they are due a refund but did not receive one were given the opportunity to file an updated 2020 tax return.

That must be done within three years after the original return’s filing date or, if later, two years after the tax owed was paid.

Read more: Fair Tax: Republican-led House votes to abolish IRS

Unemployment Benefits

IRS-Tax-TaxRefund-Newsbreak-USnews
12 million American taxpayers who paid tax on their unemployment benefits in error during the 2020 tax year have now received refunds from the IRS.

By using an online IRS account, you can examine your tax return from 2020 in the best possible method. It takes a little while to register, but once you are, you may access a wealth of helpful data, such as your current AGI, payment history, and transcripts of prior tax returns, up to and including 2020.

Check Form 1040 Schedule 1 Line 8 of your 2020 tax transcript to verify if you claimed the unemployment compensation exclusion. Use the “Unemployment Compensation Exclusion Worksheet” on page 88 of the 2020 Schedule 1 instruction to determine the amount if you received unemployment benefits but failed to register an exclusion.

If you qualified for the exclusion in 2020 but got unemployment benefits, you could obtain an additional tax refund from the IRS by filing an updated return.

You cannot obtain any extra refunds linked to unemployment if you did not receive any unemployment benefits in 2020 or if you included the exclusion in your tax return for that year.

You must file an updated tax return for 2020 since the IRS has finished correcting overpayments of taxes on unemployment benefits starting in that year. Use Form 1040-X, which is available in all the top tax preparation software, to submit an amended return.

Generally speaking, you have up to three years from the original filing date, or two years from the date you paid the owed taxes, to file an amended tax return with the IRS (whichever is later). You should have until July 15, 2023, to file an amended return if you filed on time because your filing date is regarded as the tax deadline, which is July 15 in 2020.

You must complete and resubmit IRS Forms 1040 and 1040 Schedule 1 in addition to Form 1040-X. Due to COVID-19 delays, the IRS is now projecting a processing time of more than 20 weeks instead of the typical 16 weeks. The IRS was behind on 454,000 unprocessed Forms 1040-X as of December 20, 2022.

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