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The IRS will begin issuing tax refunds beginning in May to Americans who filed their tax returns without applying for a new unemployment benefit interruption, the federal agency said Wednesday.
The American Rescue Plan waived federal taxes on up to $ 10,200 per person in unemployment benefits received in 2020. Households with an income of $ 150,000 or more are not eligible for a tax cut.
President Joe Biden signed the $ 1.9 trillion relief bill on March 11 during tax season.
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Taxpayers eligible for the tax break wondered if they should file amended tax returns in order to receive the benefit. The IRS advised taxpayers not to file an amended tax return and stated it was a workaround.
The agency confirmed on Wednesday that it will automatically issue refunds to refundable taxpayers.
"Because the change came 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 agency said. "The first refunds are expected to come out in May and continue into the summer."
The IRS will recalculate in two phases for those who have already filed their taxes.
The agency will commence with taxpayers who are eligible for an unemployment benefit interruption of up to $ 10,200. The IRS then adjusts tax returns for married couples filing a joint tax return eligible for the tax break for benefits up to $ 20,400, as well as other couples with more complex tax returns.
Workers can still owe state taxes on their services. More than a dozen states stopped offering tax breaks for benefits as of this week.
According to The Century Foundation, around 40 million Americans received unemployment benefits last year. The average person received $ 14,000 in assistance.
The IRS is working to determine how many workers affected by the tax change have already filed their tax returns.
When should a modified return be submitted?
Taxpayers may need to file an amended tax return if the tax break new entitles them to additional federal credits and deductions that were not already on the original tax return, the IRS said.
For example, the unemployed tax break may result in some people being eligible for the earned income tax credit. Taxpayers who did not claim the credit on their first tax return will need to file an amended tax return to receive it. You might also want to review their state tax returns, the IRS said.
Individuals who applied for a tax credit or withholding tax on their first federal return but are now eligible for a larger tax break due to the unemployment waiver do not need to file an amended tax return – the IRS can adjust this for them.