While the pandemic went on, Congress was hard at work devising plans to keep Americans afloat. It passed the $1.9 trillion American Rescue Plan Act in March 2021, which was a follow-up to the $2.2 trillion CARES Act enacted in March 2020. Citizens enjoyed numerous benefits under the new scheme, some of which are now coming back to haunt them on their tax returns.
In other words, the advantages we obtained as part of the COVID-19 relief plan served to reduce our financial burden on the federal government, which might reduce the amount of tax refund we’re due.
Per Go Banking Rates, here’s a rundown of why you might not be getting a refund this year. Although the majority of them are beyond your control, there are some instances where you should contact the IRS personally.
1. You received a Child Tax Credit payment
The Child Tax Credit is a dollar-for-dollar write-off on your tax return. However, the IRS was paying families in advance for a tax credit that they would have earned if they had submitted their taxes. The IRS gave families up to half of their qualified Child Tax Credit last year, which may result in some people not receiving a refund.
2. Investment gains
Investors who have realized some of their gains may see their taxes rise dramatically this year. Mutual fund owners may be astonished to learn that they received capital gains dividends in 2021 on which they would owe taxes.
3. You heeded the student loan moratorium
Throughout the pandemic, this has been a lifesaver, but paying no student loan interest implies no student loan deduction. Depending on how much interest you pay in a given year, this might make a little or large difference in your total tax picture from year to year.
4. Collected unemployment
In 2021, the first $10,200 of unemployment income earned in 2020 will be exempt from taxation. This has not been the case in 2022 thus far. If a person only receives unemployment benefits in 2021, the effects may be insignificant because the first dollars received are taxed at extremely low rates. If this was on top of income from a new job/enterprise, it might add a significant chunk of money with no withholding.
5. Withheld is insufficient
If you didn’t work the entire year, either due to quitting or layoffs — both of which are likely in 2021 — you’ll have less tax withheld from your paycheck. If you didn’t adjust your withholding correctly along the way via your W-4 with employers, you could be exposed to a much higher number than in previous years.
6. The IRS delayed
You may not receive a dollar if your tax information was revised or rectified and indicates that you are entitled to a tax refund due to the IRS failing to update your account. This is due to no fault of your own. If you haven’t gotten your tax refund after six weeks, go to your local IRS office or contact the federal government for assistance.
How to wisely use your tax refund?
A poll’s most significant finding was that four out of every five Americans expected to save their tax refunds or use them to pay off debt – 45 percent and 37 percent, respectively. Younger individuals were more inclined to do both than older ones, and males were considerably more likely to keep their returns rather than spend them to settle their obligations. Women were split almost equally.
A smaller percentage of respondents, roughly 15%, will utilize the funds to try to develop wealth for the future. By a margin of 2 to 1 or more, younger people are more likely than older people to invest their refunds — the same is true for gender. Only over a quarter of males, compared to less than 10% of women, will invest their tax refunds, as per MSN.