Our refund is held up due to the unemployment tax break. Is that why we have not gotten our stimulus payment??

[clawmark]

Taxes filed with TT on Feb. 14.  They have been held up because of the unemployment tax break and the IRS is now saying they will start issuing refunds in May (have done direct deposit to same bank for over 10 years). However, we also did not get our stimulus payment (#1 and #2 were direct deposited immediately). I would think there would be an outcry by all of the people on unemployment who filed taxes early and now have not gotten stimulus because of the holdup?  IRS Get My Payment says “Payment Status - Not Available.”  Anyone else??  Will we get our stimulus once our 2020 taxes are processed in May?  Any clues?

[ColeenD3]

IRS letters explain why some 2020 Recovery Rebate Credits are different than expected

WASHINGTON − As people across the country file their 2020 tax returns, some are claiming the 2020 Recovery Rebate Credit (RRC). The IRS is mailing letters to some taxpayers who claimed the 2020 credit and may be getting a different amount than they expected. 

It’s important to remember that the first and second Economic Impact Payments (EIP) were advance payments of the 2020 credit. Most eligible people already received the first and second payments and shouldn't or don’t need to include this information on their 2020 tax return.

People who didn’t receive a first or second EIP or received less than the full amounts may be eligible for the 2020 RRC. They must file a 2020 tax return to claim the credit, even if they don’t usually file a tax return.

When the IRS processes a 2020 tax return claiming the credit, the IRS determines the eligibility and amount of the taxpayer’s credit based on the 2020 tax return information and the amounts of any EIP previously issued. If a taxpayer is eligible, it will be reduced by the amount of any EIPs already issued to them.

If there’s a mistake with the credit amount on Line 30 of the 1040 or 1040-SR, the IRS will calculate the correct amount, make the correction and continue processing the return. If a correction is needed, there may be a slight delay in processing the return and the IRS will send the taxpayer a letter or notice explaining any change.

Taxpayers who receive a notice saying the IRS changed the amount of their 2020 credit should read the notice. Then they should review their 2020 tax return, the requirements and the worksheet in the Form 1040 and Form 1040-SR instructions. 

Here are some common reasons the IRS corrected the credit:

• The individual was claimed as a dependent on another person’s 2020 tax return.
• The individual did not provide a Social Security number valid for employment.
• The qualifying child was age 17 or older on Jan. 1, 2020.
• Math errors relating to calculating adjusted gross income and any EIPs already received.

IRS.gov has a special section - Correcting Recovery Rebate Credit issues after the 2020 tax return is filed – that provides additional information to explain what errors may have occurred. Taxpayers who disagree with the IRS calculation should review their letter as well as the questions and answers for what information they should have available when contacting the IRS.

[clawmark]

@ColeenD3  Thanks for this.  It’s complicated!  We did NOT claim recovery rebate credit for 2020 as we did received both Stim#1 and Stim#2.  Going by our friends in our similar income range, all of them did receive their Stim#3 back in early March, but not us.  We have 1 child dependent and our income (adjusted or not) is well under $150k.

[DianeW777]

There is no need for concern on your part a this time.  Everyone's timeline is different due to the current situation and checks are being received daily. You completed your recovery rebate credit (RRC) worksheet correctly since you had already received your first and second stimulus when you filed the 2020 tax return.

This year has brought challenges. The IRS is required to reconcile the tax returns and stimulus payments as well as working on the third stimulus payments due to the American Rescue Plan Act (ARPA).  With the tax season and the changes taking place all at once, a delay should be expected for full payments. They want to be diligent and are required to follow any protocols they have been issued.  They will make any adjustments and additional payments as they complete the process.

[clawmark]

@DianeW777  Thank you for this!  I will try to be patient.  I kept seeing in the news about the SSA and Vets having issues not getting their stimulus payment and then they gave the reason why.  My friend who was also on unemployment in 2020 was told by her CPA to hold off on filing while they worked out the tax credit but it was too late for us as I had already filed.  In the meantime they got their stimulus deposit (assuming it was based on 2019 numbers). 

[JotikaT2]

Yes, the stimulus payments being issued were actually unrelated to an extent to those who had unemployment income on their tax returns.  Their CPA probably advised them to wait until guidance was issued from the IRS as far as how to report the unemployment income on their 2020 income tax return.  

As for the stimulus payment, if you are still waiting on that 3rd payment, I recommend using the links below to check the status of your payment as well as additional situations that the IRS has addressed.

Link to check your third stimulus payment

FAQs for Stimulus payments

[clawmark]

@JotikaT2   Thanks!!  I have been using these tools regularly.  According to the calculator we should receive $4200 for the 3 of us based on 2020 income numbers.  I guess what I am asking (that has not been answered anywhere that I can find...).  Is it possible that we have not gotten the stimulus because our 2020 return shows received but not processed (because it was being held due to the unemployment income)?  

[LenaH · Accepted solution]

No. Those eligible will automatically receive an Economic Impact Payment of up to $1,400 for individuals or $2,800 for married couples, plus $1,400 for each dependent. Unlike EIP1 and EIP2, families will get a payment for all their dependents claimed on a tax return, not just their qualifying children under 17. Normally, a taxpayer will qualify for the full amount if they have an adjusted gross income of up to $75,000 for singles and married persons filing a separate return, up to $112,500 for heads of household and up to $150,000 for married couples filing joint returns and surviving spouses. Payment amounts are reduced for filers with incomes above those levels.

Generally, if you are a U.S. citizen or U.S. resident alien, you are eligible for the full amount of the third Economic Impact Payment if you (and your spouse if filing a joint return) are not a dependent of another taxpayer and have a valid Social Security number (see exception when married filing jointly) and your adjusted gross income (AGI) on their tax return does not exceed:

• $150,000 if married and filing a joint return or if filing as a qualifying widow or widower
• $112,500 if filing as head of household or
• $75,000 for eligible individuals using any other filing statuses, such as single filers and married people filing separate returns.

Payments will be phased out – or reduced -- above those AGI amounts. This means taxpayers will not receive a third payment if their AGI exceeds:

• $160,000 if married and filing a joint return or if filing as a qualifying widow or widower
• $120,000 if filing as head of household or
• $80,000 for eligible individuals using other filing statuses, such as single filers and married people filing separate returns.

Most eligible people will get the third Economic Impact Payment automatically and won't need to take additional action. The IRS will use available information to determine eligibility and issue the third payment to eligible people who:

• Filed a 2020 tax return.
• Filed a 2019 tax return if the 2020 return has not been submitted or processed yet.
• Did not file a 2020 or 2019 tax return but registered for the first Economic Impact Payment using the special Non-Filers portal last year.

If your unemployment exclusion would now qualify you for the third stimulus, then your payment will be processed once the IRS excludes the unemployment from your adjusted gross income (AGI). The IRS will continue to issue the 2021 Economic Impact Payments throughout 2021.

@clawmark

[clawmark]

@LenaH  Your answer brings me back to why we haven’t already received the stimulus because we were more than eligible based on adjusted income for both 2019 and 2020 regardless of unemployment payments even before the exclusion.  We could certainly use it!  

[LenaH]

I understand. Also, please keep in mind that the Get My Payment will show you when and how the third Economic Impact Payment was issued once the information is available. It will not provide the amount of the payment or whether you are eligible to receive the payment. You will see Payment Status Not Available until a payment is scheduled for you.

Questions and Answers about the Third Economic Impact Payment — Topic A: General Information

@clawmark

[sstssugar]

My clients refund status is not showing any information. It reads as if the return was never received, though I received the accepted email. Is this related to the unemployment tax break, and if so, when should they expect to have an updated status?

[sstssugar]

Going forward completing a tax return where the unemployment tax break applies, should the $10,200 amount be deducted from the total unemployment amount?

[clawmark]

Ours is the same.  We received confirmation of acceptance but then nothing.  TurboTax sent an email telling us not to file an amended return.  The IRS has now reported that they will automatically fix the early returns with unemployment and start sending refunds in May.

[DawnC]

For a tax return you are filing now, you can look at Schedule 1 to see the UE exclusion.   Enter the full amount of the UE received in 2020 and TurboTax will apply the exclusion, you do not need to manually adjust for this.   Enter the full amount and then look at Schedule 1.  You should see the full amount on Line 7 and then on Line 8, you will see the subtraction of up to $10,200.  For returns that have already been filed without the exclusion, the IRS will start issuing additional refunds for these in May.  You do not need to amend for the additional refund.   @sstssugar

Not all stimulus #3 payments have been issued yet.   The IRS will continue issuing payments over the next several weeks, so keep checking the Get My Payment site.   But they are sending the payments without regard to your 2020 return.  And there will be no information there until after the payment has been issued.    

For tax refunds, the most up-to-date information will be found on Where's My Refund.  

[SweetieJean]

@clawmark 

The IRS is sending out Stimulus #3 payments in batches, and will take a few weeks to complete them all.  This one comes to you separately (and automatically), not as part of your 2020 tax refund.  You can check the status here:

Get My Payment | Internal Revenue Service (irs.gov)