IRS sends 430,000 additional tax refunds over unemployment benefits
The Internal Revenue Service sent 430,000 tax refunds this week - averaging about $ 1,189 - to claimants who paid too much tax on their 2020 unemployment benefit.
This is the latest round of refunds related to the additional tax exemption for the first $ 10,200 in unemployment benefits. Refunds totaled more than $ 510 million.
"The review of returns and processing corrections is almost complete as the IRS has already reviewed the simplest of returns and is now focusing on more complex returns," the agency said in a statement Monday. "The IRS plans to issue another set of corrections before the end of the year."
Under the US $ 1.9 trillion rescue plan, the first $ 10,200 in unemployment benefits for eligible applicants will not be taxed. With the law going into effect in the middle of this year's tax season, some taxpayers had already filed their federal returns without taking advantage of the break.
The agency identified 16 million taxpayers who may be eligible for an adjustment. For this refund round, the agency considered 519,000 returns and approximately 430,000 were eligible for a refund. The agency has issued more than 11.7 million reimbursements related to unemployment benefits totaling over $ 14.4 billion.
Photo: Getty Creative
Eligible applicants whose tax returns have been processed will receive two refunds: the first will reflect how they filed and the second will reflect any tax breaks they receive on their unemployment benefits. The IRS will issue direct deposit refunds to taxpayers with valid bank details upon their return in 2020. If this information is not available, a paper check will be sent instead.
Refunds are subject to customary set-off rules, including but not limited to federal overdue taxes, state income tax, and state unemployment compensation debts. If the refund is being used to pay unpaid debts, the IRS will send a separate notification.
Both regular unemployment benefits and unemployment benefits under the Economic Act are subject to income tax. But the newly added tax exemption applies to the first $ 10,200 in unemployment benefits; all services that exceed this threshold are taxable. The tax break is for the 2020 tax year and applies to households with an income of up to $ 150,000.
Taxpayers who are eligible for the Earned Income Tax Credit (EITC) after calculating the unemployment benefit exclusion may need to file an amended declaration to receive new benefits, the IRS previously said. The agency will be sending notices in November and December to people who have not applied for the EITC or Additional Child Tax Credit but may now be eligible for it.
Denitsa is a writer for Yahoo Finance and Cashay, a new personal finance website. Follow her on Twitter @denitsa_tsekova
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