Department of the Treasury, Bureau of the Fiscal Service, fact-sheet, "Treasury Offset Program, Summary of Program Rules and Requirements." Accessed March 2, 2022. Phone interview, John Rizzo, senior spokesperson, public affairs, U.S.Email, phone interviews, IRS spokesperson, Feb.Email interview, Erica York, economist, Tax Foundation, Feb.Email interview, Janet Holtzblatt, senior fellow, Urban-Brookings Tax Policy Center, Feb.IRS.gov, fact sheet, "IRS: Expanded credits for families highlight tax changes for 2021 many people who don’t normally file should file this year," February 2022.Don’t expect a refund for unemployment benefits," Jan. CNBC, "Unemployment tax refunds may be seized for unpaid debt and taxes," May 18, 2021.It appears that in the case of this Facebook post, based on the screenshot from the IRS app and the poster’s own words, someone who received unemployment benefits then had their income tax refund reduced because of an unpaid debt.īut the government does not require unemployment benefits that have been properly claimed to be paid back, and it does not reduce the amount of a tax filer’s refund if that filer does not have unpaid government debts or child support. Our rulingĪ Facebook post suggested that a tax refund could be reduced because someone received unemployment benefits. There is no universal tax penalty for receiving unemployment benefits. The IRS stopped collecting income taxes on most unemployment benefits collected in 2020, but started collecting them again in the 2021 tax year.Įvery tax situation is different, and refunds depend on each individual’s taxes paid, eligibility for tax credits and deductions, and a person’s particular outstanding debts to the government or unpaid child support. ![]() Janet Holtzblatt, a senior fellow at the Urban-Brookings Tax Policy Center, described the IRS as the "middle man," and said that the Treasury Department’s Treasury Offset Program collects debt through reduced tax refunds. If someone properly claimed unemployment benefits, and overpaid the taxes on them, the resulting refund could be reduced to satisfy unpaid government debt or unpaid child support, she said. Unemployment recipients can choose to have federal income tax withheld, at a rate of 10%, or they can make quarterly estimated payments. ![]() If the unemployment benefits were properly claimed, a taxpayer would not have to pay them back, but would be liable for income taxes on the amount they received, she said. In 2020, some states gave more money to unemployment recipients than they were eligible for, and demanded that the money be paid back, even if the recipients were not responsible for the error or knew they were being overpaid, according to the New York Times.
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