Run to the Bank: The IRS Is Sending 4 Million Tax Refunds This Week

July 19, 2021 Topic: economy Region: Americas Blog Brand: Politics Tags: IRSTaxesAmerican Rescue PlanTax ReturnDirect Deposit

Run to the Bank: The IRS Is Sending 4 Million Tax Refunds This Week

While a certain number of the refunds are from conventional tax returns, this large number is the result of a timing error by the U.S. government.

 

In the past week, there has been extensive news coverage of government assistance payments to American families. On Thursday, the first of six advance payments of President Joe Biden’s expanded Child Tax Credit were sent out; they are scheduled to arrive throughout July. They will arrive within days for those people who signed up to receive them via direct deposit and within weeks for the majority of people who opted instead for paper checks sent through the mail. 

In addition to the first Child Tax Credit payments, the IRS announced on Tuesday that it would send out roughly $4 million regular tax refunds from the most recent filing period.

While a certain number of the refunds are from conventional tax returns, the large number is the result of a timing error by the U.S. government. In an ordinary year, when a person uses unemployment benefits, it is considered taxable income like a salary, and people are required to pay taxes on it when they file them the following year.

However, the March 2021 American Rescue Plan Act—the bill responsible for the increased Child Tax Credit and for the most recent round of $1400 stimulus checks—also excluded a certain amount of unemployment income from taxes. Due to the fact that the bill did not pass until March, thousands of Americans had already completed and filed their tax returns in January and February. That means they paid taxes on their unemployment benefits if they received them during 2020.

The IRS’s most recent bundle of four million checks is partially intended to resolve this problem. The government agency has recalculated unemployed Americans’ returns and has sent checks out to the ones who paid early and therefore paid too much.

In addition to these checks, the IRS also sent out a number of normal refunds, processed after the May 17 filing deadline for 2020 income.

These refunds, like the stimulus checks and the Child Tax Credit payments, can come either in the form of a paper check or via direct deposit. The IRS has recommended signing up for a direct deposit, as it is more efficient, arrives more quickly, and does not add to the agency’s gargantuan paper backlog

The IRS has also indicated that taxpayers who overpaid in January and February would receive a letter from the IRS, explaining how much they overpaid and when they should expect a return. 

Trevor Filseth is a current and foreign affairs writer for the National Interest.

 

Image: Reuters