The Internal Revenue Service (IRS) announced on Jan.6 that they will be sending around 12 million tax refunds. The payments will be given to eligible individuals under the key provision of the American Rescue Act Plan, signed by President Joe Biden in 2021. The average amount eligible individuals will receive is $1,232 making the agency issue 12 million refunds worth a total of $ 14.8 billion.
Why is the IRS sending out more money?
When President Joe Biden signed the American Rescue Plan Act in March 2021, there is a key provision of the COVID-19 relief bill that excluded some unemployment benefits from taxation.
This means that up to $10,200 in unemployment benefits paid out in 2020 are excluded from the taxable income for each spouse who jointly filed their taxes. The exclusion was applied to individuals earning under $150,000 regardless of their filing status. The IRS reviewed the submitted tax forms prior to the passage of the American rescue Plan Act to determine who is affected by the exclusion. The agency conducted reviews and corrected 14 million returns – which made the refunds sent to 12 million people reach a total of $14.8 billion.
Who is eligible for this money?
To be eligible for the money, individuals and married couples should have an adjusted gross income of less than $150,000.
Taxpayers who paid taxes on all of their unemployment compensation earned in 2020 could be eligible once the IRS is done with the review. The IRS also made a correction to the tax refunds for other issues relating to Earned Income Tax Credit, stimulus checks for COVID-19, and the American Opportunity Tax Credit. The IRS found issues and processed refunds automatically. Those taxpayers who did not yet receive their corrected returns will need to file a 2020 amended return to receive the money.
HOW MANY AMERICANS ARE STILL OWED REFUNDS?
The IRS said they have 1.91 million unprocessed returns as of December 23. The unprocessed returns consist of 1.49 million returns that need error correction while 414,000 paper returns are in line for review and processing.
The refunds are typically issued in less than 21 days through direct deposit. However, if an applicant made mistake, it could take more than 120 days to receive the refund.