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Many Taxpayers are singing a sigh of relief after President Joe Biden (aka Money Bagg Joe) signed the $1.9 Trillion Covid Relief Bill yesterday on Thursday afternoon. But beside the obvious $2000 stimulus check ($600 of which most have already received leaving $1400), what else is in there? What do we get and when do we get it is the question I'm asked the most. So as the days progress I'll be updating our blog to keep you guys informed.
By the way, the bill is 242 pages long and I've read it all.
Ever heard the term "Hurry up and Wait?"
My dad used to say that to me everytime I asked "when" because I was super inpatient, always in a rush and wanted instant gratification lol. I used to hate it when he said that to me but in the case of the government and the new American Rescue Plan... It's definitely a hurry up and wait situation.
First up... THE STIMI
The second stimulus payment has been increased to $2000 per person. 🤗💰💚 Minus the $600 most have already received, the remaining balance of $1400 began to be deposited in taxpayers bank accounts last weekend. If your 2020 tax return hadn't been processed by the time they started distributing these funds, the IRS went off of your prior year tax return (2019 or 2018). For some that may have meant that you didn't get your full payment, maybe only a partial payment or for some you may have actually received an overpayment. As of this writing, we do not have any guidance on how the IRS plans to correct these errors or in what capacity. What we do know is that there will be some sort of rectification and as soon as we receive guidance on how to proceed we will keep you updated. In the meantime just be patient and know it will be resolved aka hurry up and wait. 😩😩
Next up... UNEMPLOYMENT
Good news or bad news first? 🤔
Bad News it is. Yes, you did receive that amount listed on your 1099-G. It included the extra $600 weekly payment don't forget. And yes, all of that unemployment was taxable. So if you didn't take our advice of making sure you had federal and state taxes withheld, you may noticed that you owed and or it reduced your refund significantly. The other bad news is that some of you did in fact opt to have taxes withheld but in some states like Kentucky, they dropped the ball big time and didn't withhold enough.
Good News is that because of Bidens new bill, the first $10,200 dollars of your unemployment is free from federal withholding. That means you are only responsible for federal tax on the unemployment you received above $10,200. Received a total $19,200? You'll only be federally taxed on $9,200. Only received $10,000 in unemployment? You won't have to pay federal income tax on it at all. Notice I keep saying Federal. That's because we're waiting on states to agree and follow suite with waiving the state withholding requirement as well. They are not required to so be prepared.
Well what about if I already filed? What if I haven't filed yet?
Bad News is that If you have already filed your 2020 tax return and you had unemployment income, you are in the hurry up and wait section with the rest of us. We are still awaiting guidance on how the IRS is going to handle these overpayments.
UPDATE: IRS announced today 03/18/2021 that they will automatically process additional refunds for people who paid taxes on their unemployment. What this means is that you don't have to do anything if you've already filed. The IRS will refund you the difference. Good News... What we do know is that the IRS is advising against filing an amendment return specifically for the unemployment overpayment so we can pretty much assume they'll be sending us another refund deposit for it. The question is how & when the IRS plans to proceed. 🤷🏻♀️
If you haven't filed yet, consider yourself lucky. Congratulations, unlike most of us you won't have to wait until the IRS figures their life out. However as of this writing, the IRS has yet to update the industries tax software to reflect the change. We assume it will be updated in the next week or two. My advice is to grab a seat in the hurry up and wait section with the rest of us unless it's absolutely necessary for you to file right now. As always I'll keep you guys posted.
Last but certainly not least.. WHERE'S MY REFUND?
Hey over here 👋🏼 . No over here 👈🏼 ... in the hurry up and wait section. You see us lol!🙋🏻♀️
Yep bad news first. The IRS has announced that it is currently behind. They have also announced that their systems are behind. If you call and can actually get through, depending on who you talk to you'll likely get this "SCRIPT." Your refund is in the errors department and it will take 10 weeks to process your return. I've heard & read several different responses. From the IRS telling a taxpayer that their return isn't in the system at all to their return is stuck in the transmitting phase. Both of which are FALSE! Their systems are lagging. The WMR tool is not working and transcripts aren't updating. If you're lucky enough to get someone who is half way decent they will be honest and tell you that they are extremely behind in processing returns.
Which is true!
The IRS is behind on processing over 7 million tax returns. They are extremely understaffed on top of being overwhelmed with millions of tax returns being submitted simply for stimulus payments. Think about it. Their workload has significantly increased because millions of americans that don't normally file (disableded, welfare recipients, homeless, imprisoned, etc) now have to file a return with the IRS just so they can receive their stimulus payment. So if you NEVER had an issue before with your taxes, you NEVER had to wait this long, the WMR tool shows anything other than what you expect it to see, you filed in February and still waiting but your friend filed last week and got their refund, or if this tax season seems different. It's because it is! The Good News
It's not your fault and definitely not your tax professionals fault. Your tax professional didn't do anything wrong. They don't have your stimulus. They didn't re-route your payment or change account numbers. You will absolutely receive your refund if you are due one. When? When? When? Well, I hate to say it but go ahead and pull up a seat next to the rest of us over here in the hurry up and wait section, they will be with us shortly. As always I will update our blog as soon as we hear any news. Be sure to subscribe so you don't miss anything!