IRS BEGINS CORRECTING TAX RETURNS
July 2, 2021 - Douglas Myser
IRS begins correcting tax returns. The Internal Revenue Service will begin issuing refunds to eligible taxpayers who paid taxes on 2020 unemployment compensation that the recently enacted American Rescue Plan later excluded from taxable income. The IRS identified over 10 million taxpayers who filed tax returns prior to the American Rescue Plan of 2021 becoming law and is reviewing those tax returns to determine the correct taxable amount of unemployment compensation and tax. This could result in a refund, a reduced balance due or no change to the taxable amount. This may also help those who would need tax resolution for other tax year debts. These corrections are being made automatically, in a phased approach, easing the burden on taxpayers. The first phase is underway and includes the simplest returns. The next phase will include the more complex tax returns which anticipates will take through the end of summer to review and correct. IRS begins correcting tax returns.
The first phase of adjustments is being made for single taxpayers who had the simplest returns, such as those filed by taxpayers who did not claim children or any refundable tax credits. The IRS will issue refunds resulting from this effort by direct deposit for taxpayers who provided bank account information on their 2020 tax return. If valid bank account information is not available, the refund will be mailed as a paper check to the address of record. The IRS will continue to send refunds until all identified tax returns have been reviewed and adjusted. These refunds are or certain federal nontax debts subject to normal offset rules, such as past due federal tax, state income tax, state unemployment compensation debts, spousal support, or certain federal nontax debts (i.e. student loans). The IRS will send a separate notice to the taxpayer if the refund is offset to pay any unpaid debts. The IRS will send taxpayers a notice explaining the corrections, which they should expect within 30 days of when the correction is made. Taxpayers should keep any notices they receive for their records. Taxpayers should review their return after receiving their IRS notices. IRS begins correcting tax returns.
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