Before spending your refund, see if these potential hiccups apply to you.
The US $ 1.9 trillion bailout plan, signed in mid-March, has sent more than just $ 1,400 of incentive payments to beneficiaries’ bank accounts. It also gave unemployed workers a break in their unemployment income.
Millions of Americans lost their jobs in 2020, especially when the pandemic first broke out. Unemployment benefits are usually taxable and recipients can choose to have their taxes withheld upfront and receive a smaller maternity allowance – or they can collect their full maternity allowance and later owe it to the IRS.
Many people went the first way by withholding taxes so they wouldn’t have to deal with an IRS bill later. But thanks to the American rescue plan, many of these people are now entitled to a refund. That’s because the Relief Act made it possible to collect $ 10,200 in tax-free unemployment benefits in 2020. Since the law wasn’t signed until 2021, many people who paid these taxes are now standing in line to get them back on the IRS refund form.
However, some people may not get their unemployment benefits refunded. Here’s why.
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Refunds can be seized
If you are refunded the taxes you paid on unemployment income but owe certain debts, you run the risk of that refund being forfeited. It’s not just the unemployment tax break. Rather, it is a general rule that applies to all tax refunds.
The federal government can seize reimbursements to settle unpaid federal debt. That said, if you have an old tax bill that you never paid, the IRS can take your refund to cover. If you owe child support, your refund can also be seized to offset the amount owed.
If you owe money to a private creditor, such as a bank or credit card company, your refund can also be seized if there is a court judgment against you. So if you are expecting an unemployment tax refund but you know you have outstanding debts, you may have to be prepared for the fact that you will not get your refund after all.
When does the unemployment benefit come?
The IRS is already in the process of issuing reimbursements to workers who paid unemployment benefit taxes in the past year. And the agency plans to keep these refunds rolling through the end of summer.
If you are expecting a reimbursement of unemployment income but are not getting one, contact the IRS and inquire about it. You can call the agency at 800-829-1040 or the “Where’s my refund?” use the IRS. Tool to check the status of your refund.
Keep in mind that if you have submitted a paper return, your refund may be delayed. In fact, when you know you don’t have any outstanding debt or any mandatory payments like child support that you are behind on, don’t panic if your refund appears a little late. However, if you owe money, that refund may never arrive.
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