The COVID-19 pandemic brought with it a host of financial difficulties, leaving many people struggling to make ends meet. One of the measures taken by the government to help alleviate this financial burden was the provision of unemployment benefits. Unfortunately, these benefits were taxed, and many people found themselves owing taxes to the IRS. This has left many wondering when the IRS will refund unemployment taxes. In this post, we will discuss the timeline for when the IRS will begin paying back unemployment taxes and what you can do to prepare for this eventuality.
The American Rescue Plan
The American Rescue Plan, which was signed into law on March 11, 2021, included a provision that made the first $10,200 of unemployment benefits non-taxable for households earning less than $150,000. This means that if you earned less than $150,000 in 2020, you would not owe taxes on the first $10,200 of your unemployment benefits. If you have already filed your taxes and paid taxes on this amount, the IRS will automatically refund the overpayment.
The IRS Has Started Issuing Refunds
The IRS began issuing refunds for taxes paid on the first $10,200 of unemployment benefits on May 17, 2021. If you are eligible for a refund, you do not need to take any action, as the IRS will automatically process the refund. However, it is important to note that the IRS is processing refunds in stages, starting with the simplest returns and working its way up to more complex returns. This means that some people may receive their refunds before others.
The IRS Is Still Processing Returns
If you have not yet filed your taxes, it is important to do so as soon as possible. The IRS is still processing returns and issuing refunds for taxes paid on the first $10,200 of unemployment benefits. If you are eligible for a refund, filing your taxes as soon as possible will ensure that you receive your refund sooner.
The IRS Is Still Dealing with a Backlog
Due to the pandemic, the IRS has been dealing with a backlog of tax returns and refund requests. This means that even if you have filed your taxes and are eligible for a refund, it may take some time for the IRS to process your request. The IRS has stated that it is doing everything in its power to process returns and refunds as quickly as possible, but it may take several weeks or even months for some taxpayers to receive their refunds.
You Can Track the Status of Your Refund
The IRS’s “Where’s My Refund?” tool allows you to check the progress of your refund if you are expecting one from them. This tool allows you to check the status of your refund online, and it will give you an estimated date for when you can expect to receive your refund. It is important to note that the estimated date is just that – an estimate – and it may change based on the IRS’s processing times.
You May Owe Taxes on The Remaining Amount
You would owe taxes on any remaining unemployment benefits you received in 2020 if you received more than $10,200. This means that you will need to file your taxes and pay any taxes owed. It is important to note that if you do owe taxes, you may be able to set up a payment plan with the IRS to pay the amount owed over time.
You Can Avoid Owing Taxes in the Future
The fact that your unemployment benefits are still taxable should be noted if you are currently receiving them. You can decide to have taxes deducted from your benefits to prevent future tax debt. This will reduce the amount of taxes owed when you file your taxes, and it may even result in a refund if you have too much tax withheld. To have taxes withheld from your unemployment benefits, you will need to fill out a Form W-4V and submit it to your state’s unemployment agency. This form allows you to specify how much tax you want withheld from your benefits, and it can be updated at any time if your tax situation changes.
Seek Professional Help If Needed
A tax expert or accountant may be able to help you if you are unsure about your tax situation or have concerns about the refund process. They can help you navigate the process and ensure that you are taking advantage of all available deductions and credits. Additionally, if you owe taxes and are unable to pay, a tax professional can help you explore options for resolving the debt, such as negotiating a payment plan with the IRS.
The IRS has begun issuing refunds for taxes paid on the first $10,200 of unemployment benefits, and taxpayers can track the status of their refund using the “Where’s My Refund?” tool. However, the IRS is still processing returns and dealing with a backlog, so it may take some time for taxpayers to receive their refunds. Additionally, if you owe taxes on the remaining amount of your unemployment benefits, it is important to file your taxes and pay any taxes owed. Finally, to avoid owing taxes in the future, it may be helpful to have taxes withheld from your benefits and to seek professional help if needed.