Have you received a letter from the IRS in the mail, mentioning something about receiving a tax refund on your unemployment? If you were on unemployment in the year 2020, then I have some news for you – you will be receiving a refund from the government. When the pandemic began lots of people lost their jobs, especially if you worked in the food and hospitality industry. Congress at the time passed a COVID relief bill, that paid an extra $600 to people on unemployment through the PUA (Pandemic Unemployment Assistance). This helped a lot of people get what they needed to be able to pay bills and such.
Once this was passed, months later it was extended to $300 to continue through to September. This was done under Joe Biden’s American Rescue Plan, among a whole other host of helpful ways to stay financially afloat through the pandemic. One of the big things he also did that lots of people looked over was that he made all Unemployment tax-free for the year of 2020. Normally unemployment income is taxable, usually around the 15% mark or so. This means that every time you received money you had to either have some taken out immediately for taxes, or to hold onto it all and pay it back on Tax Day. With this change though unemployment became tax-free for the year, so if you had already filed prior to the bill being passed you now were owed money that you had paid to the IRS. If you had not filed yet and hadn’t withheld taxes you will not be receiving any extra refund, but if you did (and most people probably did) you will be receiving a hefty refund your way in the coming weeks.
The IRS has stated they are starting with single taxpayers first, and then they will do joint filings, followed by amended returns. Meaning that if your tax forms are simple to file you will be receiving a lot sooner than others will be. There is no tool that you can actively check to see the status of your return, but the IRS has been releasing some statement about updates as they undertake this process. One thing to note and they stress this, do not file an amended return if you filed prior to the Rescue plan becoming law. The IRS handles amended returns after everything else, so they wouldn’t get to that till the end. Instead, they have recognized all those who need a return and will just be issuing them without you doing anything. This is big news for those who were on unemployment at some point, and another reason to stay up to date with financial news!
-Greg Golden
Educated Spending 