430,000 taxes paid in excess — equaling an average of $1189 — for their unemployment benefits in 2020 have been refunded by the Internal Revenue Service this week
This round of refunds is in connection with the additional tax exemption on unemployment benefits up to $10,200.
There were more than $510 million in refunds.
“The review of returns and processing corrections is nearly complete as the IRS already reviewed the simplest returns and is now concentrating on more complex returns,” the IRS said on Monday. “The IRS plans to issue another batch of corrections before the end of the year.”
The American Rescue Plan, worth $1.9 trillion, allows eligible filers to receive unemployment benefits tax-free up to $10,000.
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Due to the law being signed midway through this year’s tax season, many have already filed their returns with no take advantage of the break.
Taxpayers of approximately 16 million in number eligible for a tax adjustment were identified by the agency.
Refunds were issued for approximately (qualified) 430,000 out of 519,000 returns the agency reviewed for this round of refunds.
Since it began issuing refunds for unemployment benefits, over 11.7 million refunds totaling $14.4 billion have already been issued.
Qualified tax filers who have filed their tax returns will receive two refunds:
the first refund will reflect how their taxes were filed
the second refund will reflect any tax breaks they might receive during unemployment benefits.
Direct deposit will be used by the IRS to issue refunds to taxpayers who provide valid banking information on their 2020 returns.
The agency will send a paper check instead if that information is not available.
There may be offsets to a refund, such as past-due federal and state income tax, and debts owed to unemployment compensation programs, among other things.
Taxpayers who use their refunds to settle unpaid debts will receive a separate notice from the IRS.
Unemployment benefits derived from the stimulus legislation, as well as regular unemployment benefits, are subject to income tax.
The newly added tax exemption, however, applies only if unemployment benefits are below $10,200.
Those benefits over that limit will be taxed. For households making up to $150,000, the break is available in the 2020 tax year.
The IRS previously announced that claiming new unemployment benefits may require you to amend your return if you become eligible for the Earned Income Tax Credit (EITC) after unemployment benefits have been calculated.
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Individuals who previously did not claim the EITC or the Additional Child Tax Credit can now claim these credits.
Notifications will be sent in November and December.
