Some 13 million Americans who paid tax on unemployment compensation received in 2020 could be getting a big tax break. This week, the IRS started processing refunds to 2.8 million people who filed their returns before March — when new legislation under the made some unemployment benefits tax-free.
While the amount of each refund will depend on a person’s total earnings and how much of that came from unemployment benefits, individual taxpayers can expect to be compensated for income tax paid on up to $10,200 of jobless aid (up to $20,400 for married couples filing jointly). The unemployment tax refunds will be sent in waves, with the first batch going out to single people without dependents. Married couples and taxpayers who claim dependents will have to wait until later in the summer to see refunds.
Not everyone who may be eligible for a tax refund will get the money. We’ll explain why that is and more, including how to check on your refund online. You may also want to know about states opting out ofand the some states are offering. If you’re a parent, read more about the enhanced , for your family starting July 15 and how to use the . This story has been updated with new information.
What to know about unemployment tax break and refunds
The IRS has started sending refunds to taxpayers who received jobless benefits last year and paid taxes on the money. After some initial delays, more 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 will go out in mid-June.
Here’s what to expect:
- The tax break is for those who earned less than $150,000 in .
- 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.
- 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 run 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 send a check.
- You don’t need to . (Here’s how to .) 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.
- 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.
- The IRS will send you a notice explaining the corrections within 30 days of when a correction is made.
How to check your unemployment tax refund online
If your tax return was already processed a while back, the IRS Amended Return Status tool likely won’t help with figuring out the status of this particular unemployment tax refund.tracker, the tool and the
However, you can find out when the IRS processed your refund and for how much by viewing your tax transcript. Here’s how to find it:
1. Visit IRS.gov and log into your account. If you haven’t opened an account with the IRS, this will take some time as you’ll have to take multiple steps to confirm your identity.
2. Once logged into your account, you’ll see the Account Home page. Click View Tax Records.
3. On the next page, click the Get Transcript button.
4. Here you’ll see a drop-down menu asking the reason you need a transcript. Select Federal Tax and leave the Customer File Number field empty. Click the Go button.
5. The following page will show your Return Transcript, Records of Account Transcript, Account Transcript and Wage & Income Transcript for the last four years. You’ll want the 2020 Account Transcript.
6. This will open a PDF of your transcript: Focus on the Transactions section. What you’re looking for is an entry listed as Refund issued, and it should have a date in late May or June.
If you don’t have that, it likely means the IRS hasn’t gotten to your return yet.
What we don’t yet know about unemployment tax refunds
The IRS has provided some information on its website about taxes and unemployment compensation. We are still unclear as to how to contact the IRS if there’s a problem with your tax break refund. We’ve reached out to the IRS for clarification.
However, here’s what we know about contacting the IRS for. For more on stimulus payments and relief aid, here is information about the and details on .