The IRS is recalculating taxes on unemployment compensation and sending letters with the amount.
Angela Lang/CNET

After a long game of “hurry up and wait,” more taxpayers who paid income tax on last year’s jobless benefits received their IRS refunds this week. More than a month after its June 4 news release, when the IRS had sent out more than 2.8 million of these supplemental refund checks, the tax agency still hasn’t announced a timeline for subsequent payment batches. However, an online discussion forum seems to confirm that many started seeing either deposits or updates to their tax transcript in recent days.

The refunds are a due to a tax break for unemployment compensation under the American Rescue Plan, which excluded the first $10,200 of 2020 jobless benefits — or $20,400 for married couples filing jointly — from counting as income. Some 13 million taxpayers may be eligible for an adjustment because they overpaid when filing early in the tax season. But with a massive IRS backlog and calls going unanswered, there’s been plenty of shared angst around the refund delays.

Check your bank account for an IRS TREAS 310 code — it could mean your money is there. If not, we’ll explain below how to access your IRS account for clues about your refund status. For other unemployment news, you can read about states ending the $300 weekly bonus payments. And if you’re a parent expecting your first child tax credit payment on July 15, we can tell you how it could affect your taxes next year. We’ve updated this story with new information and will continue to do so.

10 facts about IRS tax refunds on unemployment benefits

In late May, the IRS started sending refunds to taxpayers who received jobless benefits last year and paid taxes on that money as part of their income before the American Rescue Plan went into effect.

The first batch of these supplemental refunds went to those with the least complicated returns (single taxpayers with no dependents), and refund batches will continue throughout the summer for more complicated returns. According to an igotmyrefund.com forum and another discussion platform on Twitter, some taxpayers who filed as head of household or as married with dependents started receiving their IRS money in early July.

The IRS has not issued a new timeline for unemployment compensation and has recently been focused on the rollout for the newly expanded child tax credit, which begins next week.

Here’s a quick recap of what we know.

The tax break is only for those who earned less than $150,000 in adjusted gross income. The $10,200 is the amount of income exclusion for single filers, not the amount of the refund. The amount of the refund will vary per person depending on overall income, tax bracket and how much earnings came from unemployment benefits.
You don’t need to file an amended return to claim the exemption. (Here’s how to track your tax return status and refund online.) Some who used tax software such as TurboTax said they have seen their refund amount change due to the unemployment refund, although they have yet to see a check. If the IRS determines you are owed a refund on the unemployment tax break, it will automatically correct your return and send a check or deposit the payment in your bank account. Not everyone will receive a refund. The IRS can seize the refund to cover a past-due debt, such as unpaid federal or state taxes and child support. Refunds started going out in May and will go out in batches through the summer as the agency evaluates tax returns. More complicated returns could take longer to process.
The IRS is doing the recalculations in two phases, starting with single filers 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.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.A direct deposit amount will likely show up as “IRS TREA 310 TAX REF.” The IRS will send you a notice explaining the corrections within 30 days of when a correction is made.

How to check your IRS unemployment refund status online

The IRS says eligible individuals should’ve received Form 1099-G from their state unemployment agency showing in Box 1 the total unemployment compensation paid in 2020 (if you didn’t you should request one online). Some states may issue separate forms depending on the jobless benefits — for example, if you received federal pandemic unemployment assistance, or PUA.

One way to know if a refund has been issued is to wait for the letter that the IRS is sending taxpayers whose returns are corrected. Those letters, issued within 30 days of the adjustment, will tell you if it resulted in a refund or if it was used to offset debt. The IRS says not to call the agency.

The IRS online tracker applications, aka the Where’s My Refund tool and the Amended Return Status tool, will not likely provide information on the status of your unemployment tax refund. The only way to see if the IRS processed your refund online (and for how much) is by viewing your tax records.

Here’s how to check online:

1. Visit IRS.gov and log in to your account. If you haven’t opened an account with the IRS, this will take some time as you’ll have to take multiple steps to confirm your identity.

2. Once logged into your account, you’ll see the Account Home page. Click View Tax Records.

3. On the next page, click the Get Transcript button.

4. Here you’ll see a drop-down menu asking the reason you need a transcript. Select Federal Tax and leave the Customer File Number field empty. Click the Go button.

5. The following page will show your Return Transcript, Records of Account Transcript, Account Transcript and Wage & Income Transcript for the last four years. You’ll want the 2020 Account Transcript.

6. This will open a PDF of your transcript: Focus on the Transactions section. What you’re looking for is an entry listed as Refund issued, and it should have a date in late May or June.

If you don’t have that, it likely means the IRS hasn’t gotten to your return yet.

What we don’t know about the IRS unemployment tax refunds

The IRS has only provided limited information on its website about taxes and unemployment compensation. We’re still unclear of the exact timeline for payments or how to contact the IRS if there’s a problem with your tax break refund.

Here’s what we do know about contacting the IRS for stimulus check problems. For more on stimulus payments and relief aid, here is information about the child tax credit for up to $3,600 per child and details on who qualifies.