Congress is unlikely to approve another round of stimulus checks, but that doesn’t mean you won’t get any new stimulus payments. The first installment of the expanded child tax credit (CTC) will start hitting bank accounts today. Additionally, those who overpaid their taxes on unemployment compensation will also get one more coronavirus stimulus check, but in the form of a refund.
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On Tuesday, the IRS announced that it would issue refunds this week to those who overpaid on their unemployment benefits last year. As per the agency, it will issue about four million such refunds.
The $1.9 trillion American Rescue Plan Act, which was approved in March this year, excluded up to $10,200 in 2020 unemployment compensation from the taxable income calculation. Many taxpayers, however, filed their 2020 tax return before this legislation was signed into law.
So, the taxpayers who filed their return before March and overpaid due to the exclusion, will be eligible for the refund. Such taxpayers will either get this stimulus payment as a refund, or they can apply the amount to other outstanding taxes or any outstanding federal or state debt.
The IRS has been issuing these refunds for the past couple of months, and plans to issue the refunds throughout the summer. For this month, the agency has started sending refunds via direct deposit from July 14, while the refunds via paper check will start July 16.
As per the agency, it’s been reviewing Forms 1040 and 1040SR that were filed before the approval of the American Rescue Plan Act, to identify taxpayers eligible for the refund.
The IRS notes that it has identified about 4.6 million taxpayers who may be eligible for a refund in July, but of these, about 4 million would get a refund. As per the IRS, the average refund amount would be $1,265.
Do you need to file an amended tax return?
Similar to stimulus checks and other stimulus payment, eligible taxpayers don’t need to do anything to get the refund.
However, “if, as a result of the excluded unemployment compensation, taxpayers are now eligible for deductions or credits not claimed on the original return, they should file a Form 1040-X, Amended U.S. Individual Income Tax Return,” the IRS says in a press release.
The IRS has detailed the scenarios in which the taxpayers need to file an amended return. To know more about these scenarios and other details about these refunds, visit this link.
Taxpayers will get a letter from the IRS detailing the adjustment made and the adjusted amount. The adjustment here means how the IRS is adjusting the refund due, including issuing a refund or adjusting toward a debt, etc.
