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IRS: Refunds to Taxpayers Who Paid Unemployment Insurance Taxes Will Be Distributed in Two Phases


Office of the United States Department of Labor, in Washington DC.

Photo: ALEX EDELMAN / AFP / Getty Images

Sending refunds to taxpayers who they overpaid on their unemployment insurance tax return It will be carried out in two phases, as announced by the Internal Revenue Service (IRS).

Although since last Friday, the IRS began processing these funds under the Biden Administration’s “American Bailout Plan”, the corrections will be made automatically and the arrival date of the refund will depend on the type of return that the person filed.

Two-Stage Unemployment Insurance Refund Sending

“The first phase started and includes the simplest statements. The second phase will include the most complex tax returns to review and adjust, and which the IRS anticipates will take place until the end of the summer to review and correct, ”the agency explained.

The first to receive refund payments under this concept are single taxpayers who filed the simplest tax returns, who did not claim children or other refundable tax credits.

Those who received $ 10,200 or less of unemployment insurance are beneficiaries of the exemption

The money disbursement is based on the provisions of the third stimulus law that establish that those who received $ 10,200 or less last year for unemployment insurance do not have to pay that income.

Unemployment compensation is taxable income. The American Rescue Plan excludes $ 10,200 of 2020 unemployment compensation from the income used to calculate the amount of taxes owed. The $ 10,200 per person exclusion applies to single or married taxpayers filing a joint return, with adjusted gross income less than $ 150,000. The $ 10,200 is the income exclusion amount, not the refund amount. The amount of refunds will vary and not all adjustments will result in a refund, ”detailed the IRS.

More than 10 million taxpayers would be eligible

The entity identified more than 10 million taxpayers who filed their tax returns before the 2021 American Rescue Plan was approved and would be eligible for the exemption.

IRS will mail notice to report adjustment

About 30 days after the refund is sent, the person is supposed to receive a notice by mail from the IRS notifying them of their unemployment insurance adjustments.

“The IRS will send taxpayers a notice explaining the adjustments they can anticipate within 30 days of receiving any refund. Taxpayers should keep this notice for their records. Taxpayers who receive refunds should review their return after receiving their notice from the IRS, “the office warned.

IRS could seize refund for outstanding debts

It should be noted that these refunds are subject to normal offsetting rules, so the IRS can withhold the money for outstanding debts.

“Overdue federal taxes, state income tax, state unemployment compensation debts, child support, spousal support, or certain federal non-tax debts, such as student loans, will be deducted. The IRS will send a notice to the taxpayer if the refund is offset to pay unpaid debts, ”specified the IRS.

Third stimulus law also suspends excess payments by APTC

The “American Bailout Plan,” approved in March, also suspends the requirement to return excess advance payments of the Premium Tax Credit (excess APTC). If a taxpayer paid the excess APTC when filing the 2020 tax return, the IRS will automatically return this amount as well. “If the IRS corrects the taxpayer’s account to reflect the unemployment income exclusion, the amount of excess APTC that the taxpayer paid will be included in that adjustment. The IRS is also adjusting the accounts of those who paid the excess APTC, but did not report unemployment compensation on their 2020 tax return, ”explained the entity.

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