Stimulus update: IRS issues more refunds for overpaid taxes on unemployment benefits

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The IRS announced Wednesday that it is issuing another batch of refunds to taxpayers who received unemployment benefits last year and overpaid on their income taxes.

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The refund checks will be going to those who paid their income tax prior to the passage of the American Rescue Plan Act in March that exempted taxes on the first $10,200 of unemployment compensation.

This is the fourth round of refunds related to the unemployment compensation exclusion provision. The IRS started with the simplest tax returns and is reviewing more complex returns, according to the agency.

According to the agency, refunds by direct deposit began on Wednesday and refunds via paper checks will begin Friday.

Taxpayers getting the refunds can expect to receive letters from the IRS, generally within 30 days of the adjustment, informing them of what kind of adjustment was made (such as refund, payment of IRS debt payment or payment offset for other authorized debts) and the amount of the adjustment, the agency confirmed on its website.

According to the agency, the IRS review of returns from those who received unemployment compensation in 2020 is focused on “minimizing burden on taxpayers so that most people won’t have to take any additional action to receive the refund.”

“The IRS review means most taxpayers affected by this change will not have to file an amended return because IRS employees have reviewed and adjusted their tax returns for them,” an agency press release read.

“For taxpayers who overpaid, the IRS will either refund the overpayment or apply it to other outstanding taxes or other federal or state debts owed.”

The average refund for this round of adjustments is $1,686.