Nearly 4 million more people who overpaid their taxes on unemployment compensation they received last year should get a refund from the IRS soon.
Refunds by direct deposit will begin July 14 and refunds by paper check will begin July 16, the IRS said Tuesday. The average refund is $1,265.
The refunds are for those who overpaid and filed their taxes before the American Rescue Plan passed in early March, after tax season had opened. The stimulus package let taxpayers exclude up to $10,200 of unemployment benefits in taxable income for individuals and married couples with less than $150,000 in modified adjusted gross income. Rather than have people file amendments to their tax returns to claim the exclusion, the IRS said it would do the heavy lifting for them. Claims for unemployment insurance surged last year after restrictions meant to slow the spread of COVID-19 shut down or curtailed many businesses. For the first time, self-employed workers qualified for jobless benefits, too.
In May, the IRS said it was working through these returns in phases, starting with the simplest returns of single taxpayers, and issuing refunds throughout the summer. It said if a taxpayer was owed any money from the adjustment, it would either refund the overpayment or apply it to other outstanding taxes or other federal or state debts owed. In June, it sent out more than 2.8 million refunds.
Taxpayers will generally receive letters from the IRS within 30 days of the adjustment, telling them what kind of adjustment was made and the amount of the adjustment. The IRS warned that if the adjustment it made to income now makes taxpayers eligible for deductions or credits not claimed on the original return, they should file an amendment to claim those. Those deductions and credits might include the Additional Child Tax Credit or the Earned Income Tax Credit.
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