WASHINGTON – The Internal Revenue Service will begin issuing refunds this week to eligible taxpayers who paid taxes on 2020 unemployment compensation that the recently-enacted American Rescue Plan later excluded from taxable income.
The IRS identified over 10 million taxpayers who filed their tax returns prior to the American Rescue Plan of 2021 becoming law in March and is reviewing those tax returns to determine the correct taxable amount of unemployment compensation and tax. This could result in a refund, a reduced balance due or no change to tax (no refund due nor amount owed).
These corrections are being made automatically in a phased approach, easing the burden on taxpayers. The first phase is underway and includes the simplest returns. The next phase will include the more complex tax returns which the IRS anticipates will take through the end of summer to review and correct.
The first phase of adjustments is being made for single taxpayers who had the simplest tax returns, such as those filed by taxpayers who did not claim children or any refundable tax credits.
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