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Extra tax refund money for unemployed isn’t arriving soon enough for some

Extra tax refund money for unemployed isn't arriving soon enough for some

FINANCIAL NEWS

Extra tax refund money for unemployed isn’t arriving soon enough for some

Child tax credit: How to know if you qualify, how much you’ll get paidBiden increased child tax credit payments under his American Rescue Plan. Here’s the latest on how much you’ll get and when you’ll get the payments.Just the FAQs, USA TODAYExtra tax refund money for some who lost jobs in 2020 isn’t arriving soon enough for some taxpayers.Many taxpayers who filed early could be owed a few thousand dollars now because the tax rules relating to a portion of 2020 jobless benefits changed dramatically when President Joe Biden signed the American Rescue Plan into law March 11. It’s quite a lucrative new, limited tax beak designed specifically to help those who lost jobs in the coronavirus-induced recession last year. The Internal Revenue Service said May 14 that it was beginning to correct those tax returns that involved the new exclusion. The IRS also said then that it would begin issuing some refunds that week to eligible taxpayers.The IRS has not stated how much refund money has been issued yet. Medical bills, food, investing and mortgages: How Americans are spending their tax refunds, stimulusWho might see an extra check The group who could be owed more money involves those who filed their 2020 tax returns in February and early March and paid income taxes on all their unemployment benefits received in 2020.The IRS began accepting 2020 tax returns Feb. 12 — a month before the change — and has estimated that more than 10 million taxpayers in this group filed returns before the law was changed. Under the rule change, taxpayers are able to exclude up to $10,200 of unemployment benefits received in 2020 for a single person from taxable income — or as much as $20,400 for married couples filing jointly.Now, some are asking: Where’s my money?The IRS said periodic payments would be made from May through summer. But as we near the end of May, many people say they didn’t receive any money yet. Many Michigan autoworkers and others owed moneyThe IRS said it would first begin issuing that extra refund money to single taxpayers who do not have complex returns, such as single taxpayers who did not claim children or any refundable tax credits.But I heard from an autoworker who told me that he received his regular tax refund March 17, a small amount that was less than $200, but as of May 26 he was still waiting for an estimated unemployment related refund of more than $2,000. Tens of thousands of auto workers found themselves suddenly out of work for eight weeks or more in 2020. Michigan’s stay-at-home order to combat the spread of the coronavirus began March 24, 2020. Many auto plants didn’t begin to gear up production until May 18, 2020.The worker at Ford Motor, who is single and faced 20 weeks of layoff last year, told me he now could exclude the maximum of $10,200 in jobless benefits from taxable income in 2020. But he filed his federal income tax return in early March before the rules changed. He figures he’s owed more than $2,000 given his income tax bracket, once the IRS corrects that return, and he’s eagerly watching his bank account for the money. Tax professionals tell me they’re hearing similar complaints from some early filers. “I still have not heard of anyone who has received a refund from the unemployment benefits tax change,” said George Papadopoulos, a Novi-based financial adviser and CPA, who prepares taxes for his financial planning clients. “As with all things dealing with IRS, patience is advised and highly recommended,” he said.”May is not over yet, maybe the IRS can still pull it off. I am telling the few affected clients to expect it sometime in June.” Who shouldn’t bank on the cashEveryone shouldn’t bank on receiving the extra money. If you filed your return later in March or afterward, your tax software or tax professional would have been able to calculate your taxes based on the new rules. And the exclusion only applies to households earning up to $150,000. If your modified AGI is $150,000 or more, you can’t exclude any unemployment compensation.The income cap is the same for singles and married couples filing joint returns.The IRS initially said it would take steps to automatically refund money this spring and summer to people who filed their tax return reporting unemployment compensation before the recent tax break for jobless benefits was put into place in March.”The first phase is underway and includes the simplest returns,” the IRS said May 14.”The next phase will include the more complex tax returns, which the IRS anticipates will take through the end of summer to review and correct.”Not everyone who qualifies is receiving cash back. Some may see that money go directly to pay unpaid debts, including federal student loans, child support and past-due taxes.The IRS will issue these refunds by direct deposit to taxpayers who provided bank account information on their 2020 tax return.”If valid bank account information is not available,” the IRS said, “the refund will be mailed as a paper check to the address of record. The IRS will continue to send refunds until all identified tax returns have been reviewed and adjusted.”The IRS has encouraged many taxpayers who lost work in 2020 to not to file an amended 2020 return, and instead let the IRS do the automatic calculation. Those who may want to file an amended return, though, include taxpayers who would suddenly be eligible for certain income-based tax credits not claimed on their original return, such as the Earned Income Tax Credit for their qualifying children. George W. Smith, a CPA and partner for Andrews Hooper Pavlik in Southfield, said he had many clients file tax returns before March 11.But he has not heard of any receiving refunds relating to the change in taxable unemployment benefits yet. “They are aware it’s coming but I assume they’ll reach out to me when it happens to insure the refund is correct,” Smith said. “It’s real money on the table,” Smith said. Contact Susan Tompor via stompor@freepress.com. Follow her on Twitter @tompor


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