Why Were Some Peoples Returns Less Than They Normally Are?
A major reason why some folks refund is actually less than the amount they were expecting or provided by their e-filing tax providers is that the federal government has “offset” or deducted monies from your tax refund to cover debts you owe other federal agencies called Treasury Offset Program (TOP) Offset. These included:
- Past-due child support
- Federal agency non-tax debts
- State income tax obligations
- Unemployment compensation debts owed to a state
Another reason for lower refunds over the last few years is that new tax laws and reforms that took effect a few years ago cut several popular deductions for a number of people. This and lower tax rates meant people got higher paychecks during the year, but their refund payment was lower at tax time.
Due to the pandemic, millions of Americans ended up relying on enhances unemployment benefits. However, many didn’t realize that unemployment benefit income is taxable (Federal and State in some cases).
So like regular income, jobless workers needed to adjust their withholdings and if they didn’t withhold enough from their unemployment pay checks, they could see a lower than expected refund when filing their tax returns or as the IRS makes adjustments based on 1099G forms that state unemployment agencies submit.
While the ARPA stimulus bill included a $10,200 unemployment exclusion credit, it was only valid for the 202 tax year. Unfortunately, it was not extended into 2021.
Did People Get Taxed For The Stimulus Payments?
No, but this is another reason why tax refund amounts have been impacted by the several rounds of advance refundable tax credits. These refundable tax credits paid you in advance against your future tax refunds and in some cases if you were over-paid or your tax situation changes then the RIS could have adjusted your refund to cover the difference. This would result in your tax refund being lower than expected. For example, many filers are receiving a letter stating the recovery rebate is different.
Some People Are Still Waiting For Their Refund, Do You Know Why This Is?
The main reason is that the tax filer claimed they received a different amount on the recovery rebate on their tax returns when the RIS says they got or a different amount of the child tax credit. When this happens, and it is happening to many tax filer this season, they will automatically adjust and send you a notice with details but it will take a while.