IRS sending more than 2.8M refunds for 2020 unemployment compensation

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The IRS says it is reviewing millions of returns and determining who is due a refund for tax payment on unemployment income. (Getty Images)

HOUSTON (CW39) –  Over 2.8 million refunds are set to be released this week to taxpayers who paid taxes on unemployment compensation that new legislation now excludes as income.

The Internal Revenue Service is working to correct unemployment compensation overpayments to help the most affected taxpayers avoid filing an amended tax return.  So far 13 million taxpayers may be eligible for the adjustment. 

The IRS says some will receive refunds, which will be issued periodically, some will have the overpayment applied to taxes due or other debts, and others will see no change. 

IRS says it plans to issue the next set of refunds in mid-June. They’ll continue the review of returns and processing corrections throughout the summer starting with the simplest returns and then the more complex returns.

Generally, within 30 days of the adjustment, taxpayers will get letters informing them of what kind of adjustment was made, such as the refund, payment of IRS debt payment or payment offset for other authorized debts and the amount of the adjustment.

According to the IRS, the American Rescue Plan Act of 2021 excluded up to $10,200 in unemployment compensation per taxpayer paid in 2020. That’s the maximum amount that can be excluded when calculating taxable income and is not the amount of refunds.

The IRS started its programming review of tax returns filed to identify the excludible unemployment compensation before the enactment of ARPA.

The IRS says it’s reviewed over 3.1 million returns, with more than 2.8 million receiving refunds

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