More unemployment tax refunds coming this week, IRS says

Posted Jul 13, 2021

The IRS is sending nearly 4 million more refunds to people who overpaid taxes on unemployment benefits before the passage of the $1.9 trillion American Rescue Plan, the agency said.

The relief package, which became law in March, allowed people to exclude up to $10,200 of unemployment benefits, or $20,400 for married couples who file a joint tax return and were both unemployed in 2020, from taxation. To be eligible, households needed to have adjusted gross income (AGI) of less than $150,000.

Direct deposits for those receiving refunds will begin on Wednesday, July 14, and paper checks will be issued starting July 16, the IRS said.

The agency already issued some refunds in May and June, and it will continue to issue refunds throughout the summer, it said.

“To ease the burden on taxpayers, the IRS has been reviewing the Forms 1040 and 1040SR that were filed prior to the law’s enactment to identify those people who are due an adjustment,” the agency said. “For taxpayers who overpaid, the IRS will either refund the overpayment, apply it to other outstanding taxes or other federal or state debts owed.”

For this round, the IRS said it identified approximately 4.6 million people who needed an adjustment, and of these, about 4 million are getting a refund. The average refund is $1,265, the agency said.

“Most taxpayers need not take any action and there is no need to call the IRS,” the IRS said. “However, if, as a result of the excluded unemployment compensation, taxpayers are now eligible for deductions or credits not claimed on the original return, they should file a Form 1040-X, Amended U.S. Individual Income Tax Return.”

Additionally, the IRS said some people may now be eligible for the third stimulus payment once the adjustment to their income is made.

“If we determined your eligibility and amount for a third EIP (Economic Impact Payment) using your 2020 information but you didn’t qualify for it or received less than the full amount because of your 2020 AGI, we’ll determine if reducing your AGI for the unemployment exclusion now makes you eligible for a third EIP or for more EIP,” the IRS said. “If so, we’ll issue your payment by direct deposit or as a paper check.”

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published this page in News and Politics 2021-07-14 03:11:53 -0700