By Leada Gore
Some of the more than 10 million Americans who overpaid taxes on unemployment benefits this year will start receiving refunds this week, according to the Internal Revenue Service.
Under President Joe Biden’s American Rescue Plan, workers who received $10,200 or less in unemployment benefits are exempt from paying taxes on the money. That law was passed in March, however, and millions of people had already filed their 2020 taxes and are now owed a refund.
Typically, unemployment compensation is treated as taxable income. The American Rescue Plan excluded up to $10,200 for individuals – or $20,400 for married couples filing jointly – in 2020 unemployment payments for those with modified adjusted gross income of less than $150,000. Refund amounts will vary, the IRS said.
The IRS will begin issuing the refunds this week, starting with the simplest returns, such as those that do not claim any children or refundable tax credits, the IRS said. The next phase will be the more complex returns, a process that the IRS anticipates will take through the end of the summer to review and correct.
Taxpayers who provided banking information when they filed their 2020 tax returns will see the money come back via direct deposit. If banking information isn’t available, a paper check will be mailed. All the refunds “subject to normal offset rules,” the IRS said, such as past-due federal taxes, state income tax, state unemployment compensation debts, child or spousal supper or some federal non-tax debts such as student loans.
IRS UNEMPLOYMENT TAX REFUND: 6 KEY THINGS TO KNOW NOW
*If the IRS determines you are owed a refund on the tax break, it will automatically send a check.
*Refunds started going out the week of May 10 and will extend into the summer, as the IRS evaluated tax returns.
*You do not need to file an amended return to claim the exemption. (Here’s how to track your tax return status and refund online.)
*Refunds will go out as a direct deposit if you provided bank account information on your 2020 tax return.
Otherwise, the refund will be mailed as a paper check to the address the IRS has on hand.
*The IRS will send you a notice explaining the corrections within 30 days of when a correction is made.
*You will not be able to track the progress of your refund through the IRS Get My
Payment tracker, the Where’s My Refund tool, the Amended Return Status tool or another IRS portal.