IRS Will Send Out ‘Surprise’ Tax Refunds This Week to 4.6 Million Americans Who Overpaid
It turns out that millions of Americans overpaid when filing their 2020 tax return. In fact, so many Americans overpaid for the same reason that the IRS is sending 4.6 million of them tax refunds.
What happened? The law changed after millions of Americans had already filed their taxes. Usually procrastination is not a good thing, but in this case, many Americans who filed their taxes before March 11, 2021, missed out on an important change. It’s estimated that over 10 million Americans could have benefited from this change if they hadn’t filed their taxes so early, and those are just the tax returns that the IRS has already discovered. There could be many more.
On March 11, 2021, the American Rescue Plan Act was signed and went into effect. This plan makes a huge difference to anyone who was on unemployment in 2020.
According to the American Rescue Plan Act, the first $10,200 received from unemployment in 2020 did not need to be included in taxable income. That $10,200 could make a huge difference in how much tax payers owe. It could even be the difference between owing money and getting a refund.
According to a statement issued by the IRS, “To ease the burden on taxpayers, the IRS has been reviewing the Forms 1040 and 1040SR that were filed prior to the law’s enactment to identify those people who are due an adjustment. For taxpayers who overpaid, the IRS will either refund the overpayment, apply it to other outstanding taxes or other federal or state debts owed.”
The refund checks being sent out vary by tax payer, but on average, they are about $1,265. That’s a respectable chunk of change.
It’s important to note that not everyone who was on unemployment in 2020 is eligible for the refund. According to the IRS, “individuals and married couples whose modified adjusted gross income was less than $150,000” do not qualify.
If you believe you are eligible for this refund, the IRS says that most likely you will not need to do anything in order to get the refund. However, you will need to file an amended tax return if any of the following apply to you:
did not submit a Schedule 8812 with the original return to claim the Additional Child Tax Credit and are now eligible for the credit after the unemployment compensation exclusion;
did not submit a Schedule EIC with the original return to claim the Earned Income Tax Credit (with qualifying dependents) and are now eligible for the credit after the unemployment compensation exclusion;
are now eligible for any other credits and/or deductions not mentioned below. Make sure to include any required forms or schedules.
Tax payers who are eligible for the refund should expect to receive a letter from the IRS within 30 days of the adjustment being made to their tax return. The letter will explain what adjustment was made as well as the dollar amount of the adjustment.
Direct deposit refunds will begin hitting tax payers’ accounts as early as July 14, 2021, and refunds via paper check will begin just two days later on July 16, 2021.
Do you think you qualify for this “surprise” tax refund?