IRS Sends 430,000 Refunds for Unemployment Tax Compensation — Who Will Receive Roughly $1,189?

Portrait Of Happy Excited Black Married Couple Reading Insurance Documents In Kitchen stock photo
Prostock-Studio /

In its most recent press release, the Internal Revenue Service announced it sent approximately 430,000 refunds to those who paid taxes on unemployment compensation that is now excluded for the income tax year 2020 under the stimulus relief bill.

See: Experts Walk You Through the Potential Tax Pitfalls of Seasonal Holiday Side Gigs
Explore: How Much the Average Person Paid in Taxes the Year You Were Born

The new provision, which falls under the American Rescue Plan of 2021, was signed into law in March and excludes the first $10,200 in unemployment compensation per taxpayer in 2020. This amount is excluded when calculating one’s adjusted gross income — it is not the amount of the refund, the IRS stressed. The exclusion is available to individuals and married couples whose modified adjusted gross income is less than $150,000.

The IRS estimates that the amount of the refunds sent out totals $510 million to taxpayers. The agency states that the effort to correct unemployment compensation overpayments will help most of the affected taxpayers to avoid filing an amended tax return. The IRS has identified over 16 million people who may be eligible for the adjustment. If you are eligible, you will either receive a refund, or have the overpayment applied to taxes due or other debts to the government.

Make Your Money Work

Stimulus Update: Investors Who Put Full Amount Into Bitcoin Saw $4.5K Profit

The $10,200 exclusion applies only to federal taxes. Most states do not apply their own tax on unemployment benefits, but each state has their own provisions, so it’s crucial to make sure whether or not your state taxes them separately. The exclusion means that the first $10,200 is not subject to federal income tax this year — anything above that amount, however, can still be qualified as taxable income.

The IRS said that the latest batch of corrections resulted in refunds averaging about $1,189.

The agency also said its review of returns and processing corrections is almost complete. If you are one of the affected taxpayers, you should receive a letter from the IRS within 30 days of the adjustment, informing you of what kind of adjustment was made and the amount to be received/deducted from other debts.

Learn: What a $100K Salary Looks Like After Taxes in Your State
Find: Looking for a Seasonal Side Gig? These 16 Places Are Hiring Right Now

The IRS is also making corrections for Earned Income Tax Credit, additional Child Tax Credit, American Opportunity Credit, Premium Tax Credit and Recovery Rebate Credit amounts affected by the exclusion. If you believe you fall under one of these corrections, the IRS states that it is more than likely you do not need to take any further action, and that the agency will take care of the correction automatically.

Make Your Money Work

More From GOBankingRates

Last updated: November 2, 2021

About the Author

Georgina Tzanetos is a former financial advisor who studied post-industrial capitalist structures at New York University. She has eight years of experience with concentrations in asset management, portfolio management, private client banking, and investment research. Georgina has written for Investopedia and WallStreetMojo. 

Best Bank Accounts of June 2022

Untitled design (1)
Close popup The GBR Closer icon

Sending you timely financial stories that you can bank on.

Sign up for our daily newsletter for the latest financial news and trending topics.

Please enter an email.
Please enter a valid email address.
There was an unknown error. Please try again later.

For our full Privacy Policy, click here.