IRS sending out unemployment tax refunds to thousands before Christmas
Why is the IRS still catching up on a massive backlog of tax refunds? That question has thousands wondering when payments will finally arrive from the Internal Revenue Service. Lawmakers are putting pressure on the agency demanding answers for the delays ahead of the 2022 tax filing season.
That’s because taxpayers will soon begin filing tax returns for 2021. If tax refunds are not fully paid by that time, then many wonder about the ability of the IRS to keep making payments. Moreover, lawmakers want to see the IRS resolve this problem before the new tax season arrives.
The Treasury Inspector General for Tax Administration recently reported that 9.6 million paper returns remain unprocessed. All of those were received in 2021. Another 5 million e-file returns have not been processed. It’s a stunning delay, which leaves millions in a grim financial situation as 2021 comes to an end.
The IRS says it plans to hire more employees, which could deviate the problem.
IRS still hasn’t processed millions of unemployment benefit refunds
Thousands of Americans overpaid the IRS for unemployment benefits received in 2020. That’s because of changes made by the last stimulus package was signed into law. The American Rescue Plan fortified major changes, including one that waived federal tax on the first $10,200 of unemployment benefits received by taxpayers in 2020.
Altogether the IRS identified 16 million Americans who qualified for a tax refund under the unemployment change. As of early-November, the agency had sent out 11.7. million refunds worth $14.4 billion.
The agency plans one more round of payments before the end of the year, which means that many Americans could receive a sizable payment before Christmas.
At this point, estimates indicate that upwards of 430,000 refunds totaling $510 million could be coming in the next two weeks.
IRS may not get refunds out before next tax season
What happens if the IRS cannot process tax returns from 2020 before next tax season? It could get really complicated. For those taxpayers the outcome would likely mean a delay to file in 2022.
Those individuals could file despite not receiving their refund from the prior year, but if there are unresolved issues on that previous tax return — experts say caution should be shown.
If filing with a tax professional — they will account for any potential issues that would arise from an incomplete tax return the year before. If filing as an individual, without the help of a tax pro — then things could get more complicated.
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