If you received unemployment compensation last year, you might be in for a surprise this week.
The IRS announced on Tuesday it will send out refunds this week to 4.6 million taxpayers who overpaid taxes on unemployment compensation received in 2020. The average refund average amount will be $1,265.
“To ease the burden on taxpayers, the IRS has been reviewing the Forms 1040 and 1040SR that were filed prior to the law’s enactment to identify those people who are due an adjustment,” the IRS said in a news release. “For taxpayers who overpaid, the IRS will either refund the overpayment, apply it to other outstanding taxes or other federal or state debts owed.”
Earlier this year, the federal tax agency confirmed that it had identified “over 10 million” people who submitted their 2020 returns before the March 11 signing of the American Rescue Plan Act, under which the first $10,200 of unemployment compensation received in 2020 is excluded from taxable income.
Refunds by direct deposit will begin on July 14 and paper check refunds will begin on July 16.
“The IRS will send taxpayers a notice explaining the corrections, which they should expect within thirty days of when the correction is made,” the news release states. “Taxpayers should keep any notices they receive for their records.”
The agency noted that any single or married individual with a modified adjusted gross income of over $150,000 is not eligible for the tax exemption. The agency also said that “not all adjustments will result in a refund.”
In some cases, taxpayers may need to file an amended return if they are now eligible for deductions or credits not originally claimed on their return.
The Associated Press contributed to this story.