The IRS is sending money to taxpayers for various reasons:
Unemployment benefits erroneously reported as income. Some taxpayers may have filed their 2020 income tax returns before Congress enacted an exclusion of up to $10,200 for unemployment benefits received last year, provided modified adjusted gross income was under $150,000. The IRS has begun to issue refunds to eligible taxpayers, with these payments continuing throughout the summer (IR-2021-111). This is automatic; no taxpayer action is required.
Note: The change in income as a result of the adjustment for unemployment benefits may allow taxpayers to claim or increase credits based on their reduced adjusted gross income. The IRS will make adjustments for the earned income tax credit and other refundable credits, where applicable.
EIP3. The IRS distributed about $167 million Economic Impact Payments authorized by the American Rescue Plan Act by the end of May (IR 2021-111). The IRS will continue to disburse these payments to taxpayers for whom the IRS did not have information (i.e., they did not file tax returns) or who qualify for “plus-up” payments (additional amounts if the IRS processed EIP3 before the taxpayer filed the 2020 return).
Advance child tax credit. Starting July 15, 2021, the IRS will be begin to send half of the estimated child tax credit to eligible taxpayers in three or six monthly payments (IR-2021-113). Eligible families will receive up to $300 per month for each child under age 6 and up to $250 per month for each child age 6 and above. When taxpayers file their 2021 returns, they will have to reconcile their advance payments with amounts to which they were eligible to receive. Changes in income or dependents may result in an additional credit amount or a tax liability.
Special procedure for nonfilers to ensure receipt of certain payments. To process certain payments—advance child tax credit payments, EIP3s and the 2020 recovery rebate credit for EIP1 and EIP2—the IRS needs additional information about taxpayers who are not otherwise required to file income tax returns. The IRS has a simplified procedure (Rev. Proc. 2021-24). The IRS will permit the filing of a simplified federal income tax return for 2020; most lines only need an entry of zero even if other values would apply; Rev.Proc. 2021-24 has the details. Taxpayers who are not otherwise required to file a return should submit Form 1040 or 1040-SR by mail, marking the top of the printed form “Rev. Proc. 2021-24”. Alternatively, the form may be filed electronically. Those with adjusted gross income of zero should enter “1” for taxable interest, total income and AGI so the return can be processed (returns showing zero AGI cannot be filed electronically).
A statutory term describing the cost used to determine your profit or loss from a sale or exchange of property. It is generally your original cost, increased by capital improvements, and decreased by depreciation, depletion, and other capital write-offs.