The IRS is now refunding thousands of dollars to those who paid taxes on unemployment benefits.
Sarah Tew/CNET
The IRS may send you a refund if you paid taxes on unemployment benefits you received in 2020. The agency is now returning money to as many as 10 million taxpayers who filed their taxes before the $10,200 tax break became law with the American Rescue Plan Act in March. Under the new rules, money from unemployment benefits isn’t considered earned income during the pandemic — therefore, you can’t be taxed on the money you received in 2020.
Last week, the IRS began sending the first round of tax-break refunds to eligible people. The agency said it’ll continue to refund the money through the summer as it processes tax returns and reviews taxes paid on unemployment benefits. The IRS said refund amounts will vary and not every adjustment will result in a refund. The March stimulus bill also extends the weekly $300 bonus unemployment payments, authorizes a third stimulus check (and “plus-up” payments) and boosts the child tax credit to as much as $3,600 per kid.
Twenty-three million Americans filed for unemployment last year, according to the Bureau of Labor Statistics. Under Pandemic Unemployment Assistance, this included people who were laid off as well as gig workers, contractors and self-employed people who don’t normally qualify for unemployment insurance. We’ll explain the unemployment tax refund, and the details we’re still waiting to learn. Here’s when you can expect to receive your first child tax credit payment and how much you may get when the payments start in July. Here’s also what we know about the two child tax credit portals. This story has been recently updated with new information.
IRS unemployment tax refund: 9 important things to know
The IRS is now sending unemployment refunds to taxpayers who paid taxes on the jobless benefit when they filed their return earlier this year. Here’s what you can expect.
The tax break is for those who earned less than $150,000 in adjusted gross income.Refunds started going out the week of May 10 and will run through the summer, as the IRS evaluates tax returns.If the IRS determines you are owed a refund on the unemployment tax break, it will automatically send a check.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 is doing the recalculations in two phases, starting with those who are eligible for the up to $10,200 tax break. It will then adjust returns for those married-filing-jointly taxpayers who are eligible for the up to $20,400 tax break.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.The IRS can seize the refund to cover a past-due debt, such as for federal or state tax and child support.
Unemployment tax refund info we don’t know yet
There is still something we don’t know about the refunds. We’ve contacted the IRS for clarification:
How to contact the IRS if there’s a problem with your tax-break refund. (Here’s what we know about contacting the IRS about stimulus check problems.)
For more details, here everything about the child tax credit for up to $3,600 per child and who qualifies for the child credit.