IRS issuing more refunds for taxes paid on excludible unemployment compensation
The IRS, in a News Release, announced it is issuing another round of refunds to taxpayers who paid taxes on excludible unemployment compensation received in 2020. The IRS said refunds by direct deposit began July 14 and refunds by paper check will begin July 16.
Excludible unemployment compensation. The American Rescue Plan Act of 2021 (ARPA, ARP Act; PL 117-2) excluded up to $10,200 in 2020 unemployment compensation from taxable income calculations. This exclusion applies to individuals and married couples whose modified adjusted gross income was less than $150,000.
Many taxpayers with excludible unemployment compensation filed their 2020 returns before the ARP Act became law in March 2021. Instead of requiring these taxpayers to file amended returns, the IRS is reviewing returns reporting unemployment compensation to determine which taxpayers are eligible for a refund because they paid tax on excludible unemployment compensation. See IRS has begun reviewing tax returns for unemployment compensation exclusion (05/17/2021).
IRS issuing refunds in batches. The IRS previously issued refunds related to excludible unemployment compensation in May and June 2021, and it will continue to issue refunds throughout the summer.
For this batch, the IRS identified approximately 4 million taxpayers who are expected to receive a refund. The refund average is $1,265.
Most taxpayers need not take any action and there is no need to call the IRS. However, if a taxpayer's income is reduced as a result of the excludible unemployment compensation and the taxpayer now becomes eligible for deductions or credits not claimed on the original return, then the taxpayer should file a Form 1040-X, Amended U.S. Individual Income Tax Return.
Call an advisor today to see if you qualify for an excludible unemployment compensation refund. FIND A LOCATION