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Thousands of people are still delayed in their tax refunds when receiving unemployment benefits


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Thousands of taxpayers may still be waiting for a refund on unemployment benefits received during the Covid pandemic, as the IRS grapples with a backlog of tax returns.

The US Rescue Plan Act, a pandemic relief act, exempted federal tax on unemployment benefits of up to $10,200 a person collects in 2020, a year in which the unemployment rate climb higher than at any time since the Great Recession.

However, many people eligible for the tax relief filed their annual tax returns before President Joe Biden signed the legislation into law on March 11.

That means they overpaid their federal tax bill and may be eligible for a refund. (In other cases, the overpayment is applied to unpaid taxes and liabilities.)

To date, the IRS has identified a total of more than 16 million people who may be eligible for the tax relief. The agency sent over 11.7 million refunds worth $14.4 billion, according to the most recent figures data.

Payment started in the May; The IRS has indicated that they will continue into the summer and fall. However, it is not clear how many people are still waiting. (Not all people the IRS identifies as potential candidates are necessarily eligible.)

IRS plans to issue another round of refunds before the end of the year. The agency sent out approximately 430,000 refunds totaling more than $510 million in the final batch, which was released around November 1. The average refund was about $1,189.

An IRS spokesperson did not specify how many payments the agency will issue or when it will.

Complex profits

The delay has largely affected taxpayers with complex profits. These may include, for example, a married couple, where each spouse receives benefits in 2020.

Tax calculation for a married couple can be more complicated than it is for a single taxpayer. Each spouse is entitled to exclude up to $10,200 in benefits from federal taxes. But that doesn’t mean that this couple, as a tax unit, is always tax-free on double the amount ($20,400).

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Let’s say one spouse received $5,000 in unemployment benefits in 2020 and the other received $25,000. This couple will exclude $15,200 in tax benefits (instead of the full $20,400). That’s because the latter spouse can only exclude up to $10,200 in benefits.

“The review of returns and processing of repairs is nearing completion as the IRS has reviewed the simplest returns and is now focusing on more complex returns,” according to a statement by the company. agency in November.

Not all taxpayers are eligible for unemployment tax relief. For example, they are not qualified if their revised adjusted gross income (excluding unemployment compensation) is $150,000 or more.

Congress did not pass legislation that would reduce taxes on benefits collected in 2021.

IRS Backlog

The IRS is facing a backlog of individual tax returns. Office Yes 6.7 million unprocessed personal profits as of December 4.

The IRS has had a busy year (i.e., implementing new rules on stimulus checks, unemployment compensation, and enhanced child tax credit monthly payments) after a year in which the pandemic stopped. direct operation. It also competed with a high rate of identity fraud.

Most unprocessed returns include those in error or require “special handling” from IRS staff. In these cases, the IRS uses more than the usual 21-day timeframe to issue the relevant refunds, which in some cases extend from 90 days to 120 days.

The number of special handling claims returns hit a historic high of 9.8 million on May 1 of this year; the agency reduced that number to 61,000 on December 4.

“We are working hard to clear the backlog,” the agency said. “Please do not file a second return or contact the IRS about the status of your return.”

One IRS website has answers to some frequently asked questions about tax refunds.

Modified profit

Most taxpayers will automatically receive unemployment compensation, either through direct deposit or a paper check. They do not need to file an amended tax return.

There are a few Exception, although.

For example, excluding up to $10,200 in unemployment compensation from a person’s income could make some taxpayers eligible for a deduction or deduction they didn’t claim on their original tax return. head. In this case, the taxpayer needs to pay Amended tax return to claim that new credit or deduction.

(However, this is not the case with all credits and deductions, such as the Cash Back Credit, Special Tax Credit or the Qualified Childless Earned Income Tax Credit. ; The IRS will calculate and send payments automatically in these cases send notifications for some taxpayers who may currently be eligible for the child tax credit; taxpayers responding to the notice do not have to file an amended return.)

Taxpayers can refer to this IRS website for questions related to unemployment tax relief.

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