Americans who collected jobless benefits last year and filed taxes early are starting to receive their refunds.
The Internal Revenue Service said last week that it has processed refunds for 2.8 million people who paid tax on unemployment compensation. These are people who filed returns before mid-March, when themade some unemployment benefits nontaxable.
At the same time, the IRS increased its estimate of people who could be in line for tax refunds because they filed taxes before the law changed. About 13 million Americans may be eligible, the agency said on Friday, up from the 10 million it estimated late.
Not everyone who may be eligible for a tax refund will get the money, the IRS cautioned. "Some will receive refunds, which will be issued periodically, and some will have the overpayment applied to taxes due or other debts," it said.
Single filers first, then married couples
The first batch of tax refunds went out to single people without dependents, whose tax returns are the simplest. The IRS said that married couples and heads of household — taxpayers who claim children or other dependents — will wait longer to see tax refunds.
The next set of refunds will come in "mid-June," the agency said, adding: "The review of returns and processing corrections will continue during the summer as the IRS continues to review the simplest returns and then turns to more complex returns."
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Many of these taxpayers are anxiously waiting refunds. Nicholas Lilley, a student and social media manager living near Akron, Ohio, estimates he's due at least $2,000. Lilley and his husband both lost university jobs last year and received unemployment benefits. Lilley has since been re-hired part time. His husband has not, and his unemployment benefits are set to expire at the end of June.
The couple, who have been delivering food for DoorDash to earn additional money in preparation for the benefits cutoff, damaged their car on a recent delivery. Lilley was hoping to use his tax refund to pay for repairs, but he's still waiting.
"We had thought, after we filed our taxes, that in May we'd get it," he said. "I'm like, how far is it going to be?"
How much is being refunded?
The amount of individual refunds vary depending on the person's income, how much of their earnings came from unemployment benefits and what tax bracket they're in. However, it could be substantial.
A person in the 10% tax bracket who collected more than $10,200 in unemployment benefits last year would have paid $1,020 in federal income tax on that amount. People in higher tax brackets — particularly those who were laid off from high-paying jobs before qualifying for unemployment — could be owed much more.
In addition to getting back any income tax paid on up to $10,200 of jobless aid, taxpayers could also get money back if the unemployment adjustment made them eligible for other tax credits. People who claimed the Earned Income Tax Credit, Premium Tax Credit and Recovery Rebate Credit will see those credits automatically adjusted and any money owed paid back, the IRS said.
When to file an amended tax return
Most people in line for refunds don't need to do anything to claim their additional money — besides wait. But one group of people may need to file amendments to get back everything they're owed.
Parents whose income last year was slightly too high to qualify for the Earned Income Tax Credit may want to take another look at their returns. If jobless aid put them over the income cutoff to claim the EITC, they will need to file an amended return to claim the credit.
"Taxpayers who have qualifying children and who become eligible for EITC after the exclusion is calculated may have to file an amended return to claim any new benefits," the IRS said. This doesn't apply to single taxpayers who qualify for the credit; the IRS said they will receive the credit automatically.
To be eligible to claim the EITC, a parent of one child can make a maximum of just over $41,000 if single, or $47,000 if married. The limits increase with more children.