IRS Sends 430,000 Refunds for Unemployment Tax Compensation — Who Will Receive Roughly $1,189?
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.
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.
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.
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.
More From GOBankingRates
- Find Out Who Made GOBankingRates’ Best Credit Cards Lists and Get Helpful Tips
- Give Us Your Thoughts: How Much Will You Spend Over the Holidays Relative to Last Year?
- How To Use a Credit Card Like a Pro This Holiday Season
- How To Refinance a Mortgage
Last updated: November 2, 2021