IRS begins sending refunds for overpaid taxes on unemployment benefits

The IRS will be sending out checks this week to some 2.8 million people who filed a tax return on unemployment compensation that new legislation now excludes.

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The agency stated it hopes the payments will help some of the 13 million taxpayers who paid taxes on unemployment compensation received in 2020 to avoid having to file amended returns.

The refund checks will be going to those who paid their income tax prior to the passage of the American Rescue Plan Act in March that exempted taxes on the first $10,200 of unemployment compensation.

According to the agency, “some will receive refunds, which will be issued periodically, and some will have the overpayment applied to taxes due or other debts. For some, there will be no change.”

The IRS will also be making corrections for the Earned Income Tax Credit, Premium Tax Credit and Recovery Rebate Credit affected by the exclusion.

Taxpayers getting the refunds can expect to receive letters from the IRS, generally within 30 days of the adjustment, informing them of what kind of adjustment was made (such as refund, payment of IRS debt payment or payment offset for other authorized debts) and the amount of the adjustment, the agency confirmed on its website.