The IRS has good news for those who were unemployed in 2020 and made an unemployment compensation tax overpayment. These people will receive a payment of around $ 1,189, which will be perfect for them to prepare for a festive season that looks very expensive due to the increase in inflation.
The tax agency announced on November 1 that it sent refunds to 430,000 taxpayers totaling $ 510 million as part of an adjustment effort to pay the amount due to taxpayers who filed their taxes earlier in the year, before the American Rescue Plan, signed by President Biden in March, was approved.
Unemployment compensation is taxable, and many unemployed ask for discounts to be made with the payment of each compensation, and therefore many had already paid taxes on this income. But the American Rescue Plan included several benefits for the unemployed, including the advantage that those who earned less than $ 150,000 a year do not have to pay taxes on the first $ 10,200 in unemployment benefits.
The IRS began making corrections since the new tax plan was announced and began sending out refunds for unemployment benefits in May. To date, more than 11.7 million refunds have been issued for a total of $ 14.4 billion, the IRS said in a statement.
The agency usually sends the taxpayers benefited by the correction of payments a letter within 30 days after the adjustment, informing them what type of adjustment was made. These can be in the form of a refund or used to pay a debt with the IRS or other authorized debts.
The IRS prioritized corrections for the simplest cases and is now focusing on the more complex ones. He plans to send another round of refunds before the end of the year.
So far the agency has identified more than 16 million taxpayers who may be subject to an adjustment.
IRS WILL SEND NOTICES TO THOSE WHO ARE MISSING FOR CLAIMING CREDITS
The Internal Revenue Service is also making corrections to the amounts of the Earned Income Tax Credit; Additional Child Tax Credit; American Opportunity Credit; Premium Tax Credit and Recovery Rebate Credit. The change in tax base related to unemployment compensation can affect these amounts.
Individuals who did not claim the Earned Income Tax Credit or Additional Child Tax Credit, who may now be eligible, will receive notices from the IRS in November and December.
"Most taxpayers do not need to take any action and there is no need to call the IRS," the agency said Monday.
Some people should file amended returns to claim their benefits or Form 1040-X.
The expansion of the child tax credit, also part of the economic stimulus package approved in March, represents an annual benefit of $ 3,000 per child 6 to 17 years old and $ 3,600 per child under 6 years of age for fiscal year 2021.
It has been being sent to families since July in message payments of $ 300 for each child under the age of 6 and $ 250 for the elderly, for individuals earning less than $ 75,000 annually and married couples with incomes of less than $ 150,000. November and December payments are pending to be sent.