IRS Announces Issuing Refunds for Compensation Overpayments

On July 13, 2021, the IRS announced it would issue another round of refunds this week to nearly 4 million taxpayers who overpaid their taxes on unemployment compensation received last year. The refund average is $1,265, which means some will receive more and some will receive less. Refunds by direct deposit will begin July 14 and refunds by paper check will begin July 16. The Service previously issued refunds for unemployment compensation exclusion in May and June. It would continue to issue refunds throughout the summer.

The American Rescue Plan Act of 2021 (ARP) 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. Most taxpayers need not take any action and there is no need to call the IRS. However, if, as a result of the excluded unemployment compensation, taxpayers are now eligible for deductions or credits not claimed on the original return, they should file a Form 1040-X, Amended U.S. Individual Income Tax Return.

Click here to read the full announcement.