Here's What You Need to Remember: The Internal Revenue Service recently announced that tax refunds on 2020 unemployment benefits are expected to start landing in eligible U.S. bank accounts this month.
For many cash-strapped Americans struggling to keep their heads above water amid the ongoing pandemic, it now appears that the $1,400 coronavirus stimulus checks aren’t the only monetary assistance that they can look forward to receiving.
The Internal Revenue Service recently announced that tax refunds on 2020 unemployment benefits are expected to start landing in eligible U.S. bank accounts this month. These newest sizeable payments are part of President Joe Biden’s $1.9 trillion American Rescue Plan, which was able to waive federal tax on up to $10,200 of unemployment benefits—or $20,400 for married couples filing jointly—that were collected last year.
According to the IRS, unemployment benefits are typically treated as taxable income.
The agency added that the refunds will be issued automatically to all eligible U.S. taxpayers. Keep in mind that many of those unemployed individuals who are eligible for the tax break had already filed their tax returns by the time Biden signed the legislation. Due to this, the IRS is taking the time to recalculate tax liabilities for each taxpayer.
“Because the change occurred after some people filed their taxes, the IRS will take steps in the spring and summer to make the appropriate change to their return, which may result in a refund. The first refunds are expected to be made in May and will continue into the summer,” the IRS said.
“Any resulting overpayment of tax will be either refunded or applied to other outstanding taxes owed,” the agency added.
The IRS has also acknowledged that there is no need to file an amended return, but it did admit that some early filers may still need to—especially if their recalculated income qualifies them for additional credits and deductions.
Adding another wrinkle is the fact that married couples who file a joint tax return may have to wait longer than individual taxpayers to bag that refund on unemployment benefits. According to IRS officials, this is largely due to the higher complexity of calculating their refunds.
The agency is slated to issue refunds in two phases—and it appears that most married couples who filed jointly will be part of the second phase. There has been no official announcement on when the second phase will start.
Also, take note that the IRS has given notice that there is a high likelihood that the processing of tax returns and the associated refund deliveries will be delayed for both individuals and married couples. The average wait time for a tax refund this year has ranged from six weeks to eight weeks—far longer than the typical wait time of three weeks or less.
Ethen Kim Lieser is a Minneapolis-based Science and Tech Editor who has held posts at Google, The Korea Herald, Lincoln Journal Star, AsianWeek, and Arirang TV. Follow or contact him on LinkedIn.
This article was originally published in early May and is being reposted due to reader interest.