Americans Are Still Waiting for Their Tax Refunds From Unemployment Benefits. Why It’s Getting Delayed?

By Jessa Martin On Dec 27, 2021

In 2020, millions of Americans lost their jobs and relied on unemployment payments to keep their heads above water. The passage of the American Rescue Plan, which took effect in March 2021, provided an additional benefit to individuals who were unemployed.

Not only did that relief package, which included the deposit of stimulus checks into Americans’ bank accounts, contribute to higher unemployment rates, but it also exempted up to $10,200 of unemployment benefits from taxation in 2020.

Normally, unemployment benefits are taxable, and persons who receive them can choose to have taxes deducted from their paychecks or to pay the Internal Revenue Service when they file their tax returns.

Because many people had already filed their 2020 tax returns by the time the American Rescue Plan became official, they had missed out on the opportunity to claim a refund for already-taxed unemployment income before the American Rescue Plan became official. A large number of people in that situation were eligible for a refund.

So far, the Internal Revenue Service has issued approximately 11.7 million refunds totaling $14.4 billion in connection with unemployment compensation.

However, there are still a significant number of tax filers who are due a refund. And the longer they are forced to wait, the more likely it is that they will struggle.

A serious need for financial assistance

A large number of people who were out of work last year saw an increase in their monthly income. That’s because those benefits received a generous boost, which in many cases resulted in jobless workers being paid more than their former employers.

Despite this, many people who lost their jobs as a result of the pandemic struggled to make ends meet without their monthly wages. Those who are waiting on a return for unemployment benefits taxes may find themselves in a difficult situation.

Unfortunately, the Internal Revenue Service is dealing with a significant backlog of tax returns.

A large number of IRS offices were closed last year as a precautionary measure in response to the flu pandemic, causing the agency to fall behind on processing paper tax returns, which are completed manually by IRS employees.

As a result of those closures, the Internal Revenue Service (IRS) is still experiencing backlogs in tax return processing to this day.

Normally, the Internal Revenue Service is able to award refunds for electronically submitted tax returns within 21 days of receipt of the return in question. Paper tax returns can easily take twice as long to process as electronic tax returns.

However, the Internal Revenue Service is now taking up to 120 days to process certain returns, putting taxpayers in a precarious situation.

As a result of inflation, the cost of everyday goods is rising at an exponential rate these days; Consumption is being compelled to pay higher prices at the pump and to stock their supermarket carts with enough food to nourish themselves and their family.

Waiting for tax refunds related to unemployment benefits is a financial burden that many Americans are unable to bear at the present time.

The money should arrive at some point.

Fortunately, the Internal Revenue Service (IRS) intends to provide another batch of unemployment-related refunds before the conclusion of this calendar year. Those who are still waiting for their money may not have to wait much longer than they think.

While this is happening, there is no indication that unemployment benefits received in 2021 will be eligible for a tax deduction. Because the unemployment problem was significantly greater in 2020 than it was last year, lawmakers may decide to limit the duration of this benefit to only 2020.