The IRS just sent out a little less than half a million payments connected to the stimulus bill that Congress passed earlier this year. The payments are IRS unemployment tax refunds, and they stem from the so-called American Rescue Plan that President Biden signed into law in March.
Among other important provisions of that bill, it excluded the first $10,200 in unemployment compensation that people got last year from being taxed. Normally, unemployment income is subject to taxation, the same as any income. But last year was no normal period. Millions of people lost their jobs in the wake of the economically devastating coronavirus pandemic. And this was seen as a way to not add insult to injury, letting people keep more of the jobless income that’s helped them get by.
IRS issues more unemployment tax refunds
So why did the IRS need to send out waves of unemployment refund checks as a result of the law’s provision? This recent wave, in fact, was the latest. And it sent out about 430,000 refunds totaling more than $510 million to taxpayers.
That’s because many Americans went ahead and filed their taxes this year before the stimulus law got passed in March. So once that happened, the IRS started combing back through already-completed tax returns, looking for people who essentially overpaid.
“Earlier this year, the IRS began its review of tax returns filed prior to the enactment of ARPA to identify the excludable unemployment compensation,” a news release from the tax agency states. “To date, the IRS has issued over 11.7 million refunds totaling $14.4 billion.”
So far, the IRS has identified over 16 million taxpayers who may be eligible for an unemployment adjustment. However, not all of them will get an unemployment tax refund. Some will, but others will have the overpayment applied to taxes due or other debts.
Some additional key facts:
- The latest wave of refunds affected more than 519,000 returns. And some 430,000 taxpayers got refunds averaging about $1,189.
- The IRS is planning to issue another batch of corrections before the end of this year.
- The tax agency also says that its review of returns and processing corrections is nearly complete.
- The $10,200 exclusion applied to individuals and married couples whose modified adjusted gross income was less than $150,000.
- The IRS already reviewed the simplest tax returns and is now concentrating on more complex returns.
“Impacted taxpayers will generally receive letters from the IRS within 30 days of the adjustment, informing them of what kind of adjustment was made,” the IRS news release continues. The letter will include the amount, as well as whether a refund is coming.