On Unemployment Last Year? The IRS Might Owe You More Money.
If you anticipate receiving a refund, the IRS has provided tools to help Americans access stimulus-related payments. If you are expecting a refund, you can use the “Get My Payment” tool on their website.
The American Rescue Plan Act, passed in March 2021 at a cost of $1.9 billion, was roughly three hundred pages long and included dozens of separate measures. For many Americans, the most important of these was the bill’s signature function – a $1400 stimulus check, sent out to all Americans making less than $75,000 per year. The bill also expanded several other benefits, including the Child Tax Credit, which nearly doubled the tax deduction for children under the age of six from $2000 per year to $3600 – essentially amounting to a second stimulus check in itself.
However, one of the American Rescue Plan’s most significant benefits has been the expansion of tax-free unemployment benefits. More specifically, the measure made up to $10,200 in unemployment benefits tax-deductible for 2020. Since most states’ unemployment benefits are less generous than this, most Americans will not have to pay taxes on any of it.
Therefore, if you paid your taxes already (which you probably should have, since they were due on May 17), and you paid taxes on the unemployment benefits that you received, you overpaid and the IRS owes you a refund. The Treasury Department has said that, out of the 7.4 million tax returns that included unemployment, 7.3 million overpaid and are owed refunds because of this exclusionary rule. And this 7.3 million is several weeks old; given how recent the filing deadline was, it is likely that millions more cases of overpayment will pop up as time goes on.
Collectively, the Treasury Department estimates the value of these claims at more than $80 billion – most of which will need to be returned. The IRS, however, has not specified how many Americans it intends to reimburse for accidentally overpaying.
If you overpaid, it will probably take several months for the IRS to fix the problem. The agency is facing an acute paper backlog, one of the reasons that it repeatedly requested that stimulus recipients sign up for direct deposit in the run-up to the third round of checks. Moreover, the agency has faced staffing shortages during the pandemic – shortages that Biden’s future plans promise to address through an injection of $80 billion, although most of these funds are earmarked for increased audits.
If you anticipate receiving a refund, the IRS has provided tools to help Americans access stimulus-related payments. If you are expecting a refund, you can use the “Get My Payment” tool on their website.
Trevor Filseth is a news reporter and writer for the National Interest.