The Internal Revenue Service (IRS) announced it sent out 12 million refunds totaling nearly $15 billion after making corrections to taxes that were filed in 2020.
The agency said it reviewed forms 1040 and 1040-SR from the 2020 tax year that were filed before March 2021, or when the American Rescue Plan was signed into law. It excluded up to $10,200 in 2020 unemployment compensation, the IRS said, from taxable income calculations.
Other corrections that were made by the agency included adjustments to the Earned Income Tax Credit, Recovery Rebate Credit, Additional Child Tax Credit, American Opportunity Tax Credit, Premium Tax Credit, and Advanced Tax Credit, according to the news release.
Some 14 million tax returns were corrected by the IRS, resulting in about 12 million refunds totaling $14.8 billion. That averaged out to about $1,232 each, the release said, adding that the corrections were made starting in 2021.
2021 and 2022
For 2021’s taxes, many Americans are still awaiting their 2021 refunds and federal stimulus payments, according to the IRS. Federal officials say that there has been hiring challenges, while a Government Accountability Office report found that as of September, the IRS had about 12.4 backlogged returns to process.“As of November 11, 2022, the IRS had 3.7 million unprocessed individual returns received this year,” the agency said in November. “Of these, 1.7 million returns require error correction or other special handling, and 2 million are paper returns waiting to be reviewed and processed.”
And as for 2022’s taxes, the IRS announced in November that “refunds may be smaller.”
The rule doesn’t change what income is taxable and affects what payment information the IRS will receive, while the American Rescue Plan rule dropped the reporting threshold from $20,000 to $600 per year. Gig workers and sellers who use online platforms and payment networks, under the law, are required to report their income.
Acting IRS Commissioner Doug O’Donnell told news outlets in mid-December that the reporting rule triggered widespread confusion and would be delayed by another year.
“The additional time will help reduce confusion during the coming 2023 tax filing season and provide more time for taxpayers to prepare and understand the new reporting requirements,” O’Donnell told the Wall Street Journal and other outlets at the time.
“The I.R.S. and Treasury heard a number of concerns regarding the timeline of implementation of these changes under the American Rescue Plan,” O’Donnell told the New York Times. “To help smooth the transition and ensure clarity for taxpayers, tax professionals and industry, the IRS will delay implementation of the 1099-K changes.”