The Internal Revenue Service (IRS) is preparing a further 1.5 million refunds for taxpayers averaging more than $1,600 as it continues to adjust unemployment compensation from previously filed income tax returns.
For this round, the IRS identified approximately 1.7 million taxpayers who are owed an adjustment. Of this, approximately 1.5 million taxpayers are expected to receive a refund, with the average refund average standing at $1,686.
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 July 28 and refunds by paper check will begin July 30. This is the fourth round of refunds related to the unemployment compensation exclusion provision.
Since May, the IRS has issued over 8.7 million unemployment compensation refunds totaling over $10bn. The IRS will continue reviewing and adjusting tax returns in this category this summer.
In a statement, the IRS said: “The IRS effort focused on minimizing burden on taxpayers so that most people won’t have to take any additional action to receive the refund. The IRS review means most taxpayers affected by this change will not have to file an amended return because IRS employees have reviewed and adjusted their tax returns for them.
“For taxpayers who overpaid, the IRS will either refund the overpayment or apply it to other outstanding taxes or other federal or state debts owed.”