The IRS said it’s sending out more than 2.8 million tax refunds this week as it continues to correct for a last-minute tax break enacted after many recipients of unemployment benefits had filed their taxes.
The IRS said it would start sending out the refunds in mid-May, but this is the first report with specific numbers and it’s unclear how many, if any, were sent before the 2.8 million. The agency is reviewing the returns of over 13 million taxpayers to account for a provision in the American Rescue Plan that excludes the first $10,200 worth of unemployment compensation from 2020 taxable income if the taxpayer had adjusted gross income of less than $150,000. Refunds will either come by direct deposit, if the IRS has bank account information on record, or by mail as a paper check.
When the American Rescue Plan was approved by Congress in March, tax season had already begun and tens of millions of Americans had already filed their 2020 returns. Since then, the IRS has been working to issue automatic refunds and avoid the need to file amended tax returns.
Claims for unemployment insurance surged last year, with more than 23 million Americans nationwide filing for jobless benefits after restrictions meant to slow the spread of COVID-19 shut down or curtailed many businesses. For the first time, many self-employed workers qualified for jobless benefits, too.
The IRS reiterated taxpayers will receive a letter, generally within 30 days of the adjustment, laying out the details and amount of the adjustment. Instead of a refund, the IRS may use the funds to pay taxes due or other authorized debt.
The agency said it expects to issue the next round of checks in mid-June and continue through the summer, moving to the more complex returns, like married couples who file jointly.