Unexpected IRS Refunds

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Ajay Kumar, CPA, MBA

Good News!!! Additional Federal refunds are on the way to more than 2.8 million people due to changes made by the American Rescue Plan Act. Please lookout for the green and yellow cheques, don’t discard them. Here are some of the provisions resulting in a tax refund:

 

Unemployment Tax Credit

If you received unemployment benefits in 2020, you may be eligible for a refund from the IRS. The first $10,200 in Unemployment benefit income is free of federal income tax, due to changes made by the American Rescue Plan Act passed in March.

This means for any eligible taxpayer who has already filed and reported their unemployment compensation as fully taxable the IRS is automatically adjusting their return and providing them this tax REFUNDS. Based on this adjustment, refunds are being issued starting June and continuing through the summer.

Advance Premium Tax Credit

The act suspends the requirement that the taxpayers repay their excess advance payments of the premium tax credit for tax year 2020. Taxpayers who have already filed their 2020 tax return and who have excess APTC for 2020 do not need to file an amended tax return or contact the IRS. The IRS will reduce the excess repayment amount to zero with no further action needed by the taxpayer. The IRS will REFUND people who have already repaid any excess advance Premium Tax Credit on their 2020 tax return.

Child Tax Credit

The extra money may be coming your way soon since changes in the American Rescue Plan Act includes an advance on your 2021 child tax credit as soon as July.  New changes to the child tax credit may provide families with monthly payments worth up to $250 per child (and $300 per child under 6) as soon as this summer. The recent updates to the child tax credit do not require you to make any changes to your 2020 tax return. Eligibility is simply based on your 2019 or 2020 tax return information, depending on when you filed.

 

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