The IRS Might Soon Send You A Bigger Refund Than You Expected

Stimulus Check

The IRS Might Soon Send You A Bigger Refund Than You Expected

Know that the Internal Revenue Service recently announced that tax refunds on 2020 unemployment benefits—part of President Joe Biden’s $1.9 trillion American Rescue Plan—are expected to start landing in eligible bank accounts this month.

 

The disbursement of $1,400 coronavirus stimulus checks may be in the late innings, but that doesn’t mean that more government help isn’t on the way.

Know that the Internal Revenue Service recently announced that tax refunds on 2020 unemployment benefits—part of President Joe Biden’s $1.9 trillion American Rescue Plan—are expected to start landing in eligible bank accounts this month.

 

These potentially generous payments are from the waiving of federal tax on up to $10,200 of unemployment benefits—or $20,400 for married couples filing jointly—that were collected last year. Unemployment benefits are generally treated as taxable income, according to the IRS.

To make life easier for U.S. taxpayers, the agency also recently announced that it will automatically adjust tax returns if individuals qualify for a refund. Keep in mind that many of the recently unemployed had already filed their tax returns by the time Biden signed the stimulus legislation.

“Because the change occurred after some people filed their taxes, the IRS will take steps in the spring and summer to make the appropriate change to their return, which may result in a refund. The first refunds are expected to be made in May and will continue into the summer,” the IRS stated. “Any resulting overpayment of tax will be either refunded or applied to other outstanding taxes owed.” 

For those who received unemployment benefits last year, they were likely mailed a 1099-G form from their respective state unemployment insurance agency. The form should detail how much unemployment was received and how much, if any, was taken out for taxes.

Current refund estimates suggest that for single taxpayers who are eligible for the $10,200 tax break and are in the 22 percent tax bracket, they are in line to be refunded more than $2,200. That figure could potentially double for eligible married couples.

Also, do take note that married couples who file a joint tax return may have to wait longer than individual taxpayers to net the unemployment refund. IRS officials have said that this is largely due to the higher complexity of calculating their refunds. The agency is expected to issue the refunds in two phases, and it appears that most married couples who filed jointly will be part of the second phase. The IRS has yet to release details on when the second phase will start.

Keep in mind that the agency already has warned that the processing of tax returns and the associated refund deliveries will likely be delayed this year. The average wait time for a tax refund has ranged from six weeks to eight weeks, far longer than the typical wait time of the maximum three weeks.

Ethen Kim Lieser is a Minneapolis-based Science and Tech Editor who has held posts at Google, The Korea Herald, Lincoln Journal Star, AsianWeek, and Arirang TV. Follow or contact him on LinkedIn.