Here’s why you may have an unexpected big deposit in your bank account – Canon City Daily Record

For some, large deposits in bank accounts were eagerly awaited. For others, the money – sometimes thousands of dollars – came as a surprise.

The Internal Revenue Service said on Friday it had started sending out the first 2.8 million tax refunds paid on unemployment benefits last year. When Congress passed the American Rescue Plan Act in March, pandemic relief measures included earn up to $ 10,200 in tax-free unemployment benefits retroactively to 2020.

But by that time, millions of people had already filed their tax returns – so the IRS owes those tax filers some or all of the taxes they paid or withheld on those benefits. Taxpayers who filed after the signing of the new law were able to take advantage of the change.

This week’s refunds are just the beginning, with millions more coming in the summer, according to the IRS.

The lengthy review process has caused some impatience with job seekers who say they could use the extra money sooner rather than later.

Here’s what to expect

The calculation works by reducing the taxable income of the filer by the total unemployment benefits received, up to the limit of $ 10,200, then reapplying the appropriate tax rate to determine the amount overpaid.

The next batch of refunds are expected to come out in mid-June. IRS says it has identified 13 million taxpayers who “may be eligible for the adjustment,” according to A press release.

Work is slow: The agency says it has reviewed more than 3.1 million returns since mid-May, resulting in the 2.8 million account deposits or checks issued this week. The others were not reimbursed for a variety of reasons, including having other taxes owed or owing other debts.

Most do not need to file amended returns

The IRS has urged most taxpayers affected by the change in the tax exclusion for unemployment benefits to wait for automatic refunds instead of filing an amended return.

It focuses first on reviewing the simplest tax returns, those of single tax filers who have no dependents. CBS News indicated that the agency then examine the returns of married couples and heads of households, who are single or unmarried taxpayers claiming children or other dependents. These filers are unlikely to receive a refund until the end of the summer.

The only situation in which the IRS urges taxpayers to file a new amended return involves some parents with children who were not eligible for the earned income tax credit on their original return because the allowance of unemployment increased their income beyond the threshold. They would be entitled to an additional refund if the new unemployment assistance tax deduction lowers their income below the EITC threshold.

However, the IRS says single filers without children who were in a similar situation will have their number adjusted automatically and, if they are eligible, a refund will be issued.

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