[Detroit Free Press] Imagine going to the mailbox and spotting a letter from the IRS that says you owe around $1,000 or more by the end of the month when you know darn well that you're due a tax refund. It's a special kind of tax season torture.
For many taxpayers, erroneous notices and confusing letters from the Internal Revenue Service are proving to be as unsettling as waiting for months on end for a tax refund.
I'm hearing about taxpayers who filed in February and early March after losing their jobs during the economic fallout from the pandemic in 2020. Early in the tax season, they would have owed taxes because all of their jobless benefits would count as taxable income at that time.
The taxpayers filed before a key change in the tax rules but waited to pay — as was allowed until this season's May 17 deadline.
And along came the American Rescue Plan, which was signed into law on March 11. The rules changed in their favor. Suddenly, they no longer owed money but they were now going to get a tax refund. And no, they didn't send in a check by May 17.
No matter, the IRS sent them automated notices anyway in early July to collect the number that appeared on the original tax return.
It's one wacky journey that once again illustrates how taxpayers can expect all sorts of odd twists and turns along the way as the 2020 tax season drags into summer.
What's stranger still: One taxpayer in Ohio reported getting the collection notice one week in July and then, shocker, actually receiving the unemployment-related refund that he was owed the very next week.
Talk about making your head — and likely your stomach — spin.
Nearly 4 million taxpayers were set to get unemployment-related refunds in mid-July, according to the latest news from the IRS. These are taxpayers who overpaid their taxes on unemployment compensation received last year, again before the tax rules changed.