If you received unemployment benefits in 2020 due to the pandemic and paid taxes on those funds, you may qualify for a refund from the IRS. The agency began sending out refund checks earlier in May and will continue through the summer months.

Unemployed workers can’t be taxed on that benefit money due to new rules under the American Rescue Plan. The new law came into effect after millions had already filed their income tax returns, however, so taxpayers are now eligible for an IRS tax refund for the first $10,200 of single filers’ income. Those refunds started going out earlier in May, but they’re not being sent out as quickly as the third stimulus checks. The IRS is processing tax returns and is reviewing the taxes paid on unemployment insurance. The agency said refund amounts will vary; not every adjustment will result in a refund.

What is the unemployment tax refund? Nine things you need to know

The IRS says it started sending unemployment refunds to taxpayers who treated their benefit payments as income starting earlier this month. Here’s what you can expect.

  1. The tax break is for those who earned less than $150,000 in adjusted gross income.
  2. Refunds started going out the week of May 10 according to the IRS and will run through the summer, as the agency evaluates tax returns. More complicated returns could take longer to process.
  3. If the IRS determines you are owed a refund on the unemployment tax break, it will automatically send a check.
  4. You do not need to file an amended return to claim the exemption.
  5. 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.
  6. The IRS is doing the recalculations in two phases, starting with those 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.
  7. The IRS will send you a notice explaining the corrections within 30 days of when a correction is made.
  8. You won’t be able to track the progress of your refund through the IRS Get My Payment tracker, the Where’s My Refund tool, the Amended Return Status tool, or another IRS portal.
  9. The IRS can seize the refund to cover a past-due debt, such as unpaid federal or state taxes and child support.

If you have questions or need assistance, please contact our office at 610.544.5900.