You could receive a nice surprise from the IRS in your bank account just a few weeks before Thanksgiving, especially if you lost your job during the peak of the pandemic or if you filed a tax return early last year.
On Monday, the tax agency reported that it recently sent up to 430,000 refunds to taxpayers who paid taxes on unemployment compensation, the first $ 10,200 of which was excluded from income for fiscal year 2020 after the American Rescue Plan was enacted.
Refunds symbolize more than $ 510 million in recipients' wallets, averaging $ 1,189 each. This is the last round of refunds issued by the IRS.
But there is more good news, as the IRS contemplates plans to issue another batch of refunds before the end of this year. The tax agency said this review process is almost complete.
"The return review and correction processing is almost complete as the IRS has already verified the simpler returns and is now concentrating on more complex returns," the agency said. "The IRS plans to issue another batch of corrections before the end of the year."
Some taxpayers who received these refunds could have filed tax returns in February and green-light early to the unemployment tax exclusion.
The American Rescue Plan Act, signed by President Joe Biden in March, excluded the first $ 10,200 in unemployment compensation from taxable income in 2020. The exclusion was limited in scope and only applied to individuals and married couples whose income Modified Adjusted gross was less than $ 150,000.
The IRS faced severe delays after hundreds of tax returns were filed in early 2021, before the tax exemption was implemented. Instead of modifying returns, the IRS asked taxpayers to wait and said it would handle the review and refund process.
The IRS has been issuing these unemployment-related refunds for several months.
So far, the IRS said Monday, it has issued more than 11.7 million such refunds, totaling $ 14.4 billion.
During this latest round, the IRS processed more than 519,000 returns, although not all taxpayers received payments.
So far the IRS has identified more than 16 million taxpayers who may be subject to an adjustment. Some will receive refunds, while the IRS will use others' money to pay taxes owed or to cover other debts.
If you are in this group of taxpayers, the IRS will send you a letter within 30 days of this adjustment to explain why you are not receiving the refund.
Another key fact: The IRS said Monday that it will send notices in November and December to those who did not claim the Earned Income Tax Credit or the Enhanced Child Tax Credit, as they can now claim the credits. If you get that notice, the IRS said you will have to respond to it.
For those who claimed the credits on their 2020 federal income tax returns, the IRS is making corrections for the Earned Income Tax Credit, Enhanced Child Tax Credit, American Opportunity Credit, Premium Tax Credit and the Recovery Refund Credit, as the amounts could be affected by the change in taxable income related to unemployment benefits.
"Most taxpayers do not need to take any action and there is no need to call the IRS," the agency warned Monday.
But others may need to file amended returns and should take time to review their situation. Some taxpayers may qualify for different credits or deductions not previously claimed once the exclusion is calculated and their taxable income is lower.