COVID-19

The IRS Has Started Unemployment Benefit Tax Refunds for Those Who Overpaid

The IRS Has Started Unemployment Benefit Tax Refunds for Those Who Overpaid

Last March, Congress passed the American Rescue Plan, a sweeping law meant to offset the impact that COVID-19 had on the economy. One element of the plan eliminated taxes on unemployment benefits paid as long as they were $10,200 or less, but because the plan didn’t go into effect until March, as many as 10 million taxpayers who qualified for the break had already filed their taxes. If you were one of them, the IRS has good news for you. They have now started issuing refunds on those overpayments.

Though the process will take some time, the Internal Revenue Service says that the process of pulling the taxes that need to be corrected and calculating the refunds owed has begun, with the simplest returns filed by single taxpayers being addressed first, and the more complex ones filed by married couples and those that include refundable tax credits or dependents coming later. The agency said that the process should be completed by the end of the summer.

Fortunately, no action needs to be taken by those who qualify for the return. If you are owed a refund and you provided bank information when you sent in your return, the money will be deposited directly into your account. Otherwise you should keep your eye on your mailbox for the arrival of a paper check. The process of review and correction is being undertaken automatically, with the IRS determining “the correct taxable amount of unemployment compensation and tax" so that those who are owed refunds will receive those, while others will “result in a refund, a reduced balance due or no change to tax."

If you currently owe money on child support, student loans, spousal support or other types of nontax debts, expect that your refund may be captured and directed to paying them off under the “Treasury Offset Program.” The unemployment benefit refund is “subject to normal offset rules," and under its terms, the government is able to redirect tax refunds specifically for "past-due federal tax, state income tax, state unemployment compensation debts, child support, spousal support or certain federal nontax debts (i.e., student loans)." If this happens to you, you will be notified of the redirect.

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Gordon W. McNamee

Gordon W. McNamee

Gordon W. McNamee is a Certified Public Accountant (CPA) based in Rancho Cucamonga, CA. Gordon W. McNamee can assist you with your tax return preparation, payroll, accounting and tax planning needs. <br /> <br /> 2021 is Gordon W. McNamee, CPAs 38th year in the profession. As as a former IRS agent (1984 through 1987), Gordon has been in public accounting since 1987. Gordon specializes in individual, corporate, HOA, trust, estate and payroll taxes. He also prepares financial statements and provides accounting & bookkeeping services. He enjoys making his clients feel at ease while providing a personalized professional service.

GORDON W. MCNAMEE, CPA
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