IRS to send 1.5 million additional tax refunds over unemployment benefits
The Internal Revenue Service (IRS) will issue an additional 1.5 million tax refunds this week - more than $ 1,600 on average - to applicants who overpaid tax on their 2020 unemployment benefit.
Direct deposit refunds begin on July 28th and paper check refunds begin on July 30th.
This is the fourth round of refunds related to the recently added tax exemption for the first $ 10,200 in unemployment benefits.
"The IRS's efforts have been focused on minimizing the burden on taxpayers so that most people don't have to take additional action to get the refund," the agency said in a statement on Wednesday. "The IRS review means that most taxpayers affected by this change will not need to file an amended tax return as the IRS staff have reviewed and adjusted their tax returns for them."
Read more: The 10 Most Common Tax Mistakes - And How To Avoid Them
Under the US $ 1.9 trillion bailout, the first $ 10,200 in unemployment benefits for eligible applicants will not be taxed. With the law coming into effect halfway through the tax season, some taxpayers had already filed their federal returns without taking advantage of the new tax break.
The agency identified 13 million taxpayers who could be eligible for an adjustment as of June. For this refund round, the agency reviewed 1.7 million returns and approximately 1.5 million were eligible for an average refund of $ 1,686. The agency has issued more than 8.7 million unemployment benefit refunds to date, valued at over $ 10 billion.
The IRS will issue another 1.5 million tax refunds this week. (Photo: Getty Images)
The review and processing of the additional refunds will continue throughout the summer.
Applicants whose tax returns have been processed will receive two tax refunds: the first will reflect how they filed, and the second refund 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 overdue federal taxes, state income taxes, 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 Earned Income Tax Credit (EITC) after calculating the unemployment benefit exclusion may need to file an amended declaration to receive new benefits, the IRS said.
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Denitsa is a writer for Yahoo Finance and Cashay, a new personal finance website. Follow her on Twitter @denitsa_tsekova
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