Unemployment tax refund delay: What you need to know about your IRS money

Are you still waiting for your tax refund to arrive for jobless benefits you paid taxes on this year? If so, you should know the IRS is experiencing a backlog that’s causing delays in getting your money to you. The refunds are coming as a tax break for 2020 unemployment compensation under the American Rescue Plan, which excluded the first $10,200 of 2020 unemployment benefits — or the first $20,400 for married couples filing jointly — from being taxed as income.

The IRS is working to catch up on adjusting returns for the millions of Americans who filed taxes and paid on unemployment benefits before the law was passed. On June 4, the IRS said it had sent out more than 2.8 million refunds and announced a second “mid-June” batch. Weeks later, many taxpayers haven’t received their money and calls to the IRS are going unanswered. There’s plenty of shared angst on discussion platforms such as Reddit and Twitter.

We’ll continue to monitor the situation for you. Below, we’ll show you how to check your IRS account online to get some clues about your refund status. As for other unemployment news, here’s what to know about states ending the $300 weekly bonus payments and which are offering return-to-work bonuses. And if you’re a parent expecting your first child tax credit payment on July 15, we can tell you how those payments could affect your taxes next year. We update this story regularly.

9 details you should know about IRS tax refunds on unemployment benefits

The IRS started sending refunds to taxpayers who received jobless benefits last year and paid taxes on the money early in filing season. After some delays in the rollout, many single filers began seeing deposits in their checking accounts starting May 28, with 2.8 million refunds going out the first week of June.

The IRS said the next set of refunds for single filers will go out in “mid-June,” but those payments have not yet been officially confirmed. More complex returns (like those with dependents) were supposed to take longer. The IRS has not issued a new timeline for unemployment compensation and has recently been focused on the rollout for the newly expanded child tax credit, which begins this month.

Here’s what to know:

  • The tax break is for those who earned less than $150,000 in adjusted gross income.
  • The $10,200 is the amount of income exclusion for single filers, not the amount of the refund. The amount of the refund will vary per person depending on overall income, tax bracket and how much earnings came from unemployment benefits.
  • Not everyone will receive a refund. The IRS can seize the refund to cover a past-due debt, such as unpaid federal or state taxes and child support.
  • Refunds started going out in May and will go out in batches through the summer as the agency evaluates tax returns. More complicated returns could take longer to process.
  • The IRS is doing the recalculations in two phases, starting with single filers who are eligible for the up-to-$10,200 tax break. It will then adjust returns for those married-filing-jointly taxpayers who are eligible for the up-to-$20,400 tax break.
  • If the IRS determines you are owed a refund on the unemployment tax break, it will automatically correct your return and send a check or deposit the payment in your bank account.
  • Refunds will go out as a direct deposit if you provided bank account information on your 2020 tax return. Otherwise, the refund will be mailed as a paper check to the address the IRS has on hand.
  • You don’t need to file an amended return to claim the exemption. (Here’s how to track your tax return status and refund online.) Some who used tax software such as TurboTax said they have seen their refund amount change due to the unemployment refund, although they have yet to see a check.
  • The IRS will send you a notice explaining the corrections within 30 days of when a correction is made…Read more>>


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