The Internal Revenue Service (IRS) has announced that it will issue a new round of refunds to nearly four million US taxpayers who overpaid taxes on unemployment compensation received last year.
It comes as the American Rescue Plan Act of 2021, which became law in March, excluded up to $10,200 in 2020 unemployment compensation from taxable income calculations.
The exclusion applied to individuals and married couples whose modified adjusted gross income was less than $150,000.
Refunds by direct deposit will begin today (July 14) and refunds by paper check will begin July 16.
The IRS, which previously issued refunds related to unemployment compensation exclusion in May and June, said it will continue to issue refunds throughout the summer.
It has been reviewing the Forms 1040 and 1040SR that were filed prior to the law’s enactment to identify those people who are due an adjustment, and for those who overpaid, the IRS will either refund the overpayment, apply it to other outstanding taxes or other federal or state debts owed.
The IRS identified approximately 4.6 million taxpayers who may be due an adjustment, with approximately 4 million taxpayers due a refund. The refund average is $1,265, which means “some will receive more and some will receive less”.