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When will IRS send unemployment tax refunds in June? How many people are receiving them?

The Internal Revenue Service identified 13 million tax returns from individuals who may qualify for the $10,200 tax waiver on unemployment claimed in 2020.

The Internal Revenue Service identified 13 million tax returns from individuals who may qualify for the $10,200 tax waiver on unemployment claimed in 2020.

Millions of Americans who were laid off during the covid-19 pandemic benefited from state unemployment  insurance and enhanced federal unemployment compensation. Democrats in Congress gave those individuals a federal tax break in the American Rescue Plan, but they have been waiting for their tax refund as the IRS adjusts their tax returns for the partial waiver on benefits received.

The American Rescue Plan Act (ARPA) reduced the amount of unemployment compensation claimed in 2020 that could be taxed by up to $10,200 per recipient. However, millions had already filed their tax return by the time the legislation was enacted and left wondering how to proceed. The tax agency took it upon itself to ease those taxpayers' burden and said that it would do the recalculation.

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13 million taxpayers may be eligible for unemployment compensation tax break

The IRS announced on Friday that it had now processed over 3.1 million tax returns that qualified for the tax waiver of up to $10,200 on unemployment benefits claimed in 2020 out of 13 million that may possibly qualify. Of those, more than 2.8 million will see a tax refund coming this week. The agency is processing tax returns with income from unemployment benefits in two phases, starting with the simplest and more complex returns to be processed later this summer.

The IRS asked those taxpayers that had filed before the ARPA not to file an amended return unless they would become newly eligible for credits that they hadn’t claimed on their original return. The agency has now given more clarity on this issue, saying that “The IRS can adjust tax returns for those who are single with no children and who become eligible for EITC.” For those who already claimed the Earned Income Tax Credit (including those with qualifying children identified), Premium Tax Credit and Recovery Rebate Credit, the agency is making corrections to adjust for the exclusion.

However, “taxpayers who have qualifying children and who become eligible for EITC after the exclusion is calculated may have to file an amended return to claim any new benefits.”

When the IRS send the rest of the refunds?

The IRS will continue to review tax returns from taxpayers who paid tax on unemployment compensation through the summer with the next set of refunds planned for mid-June. Not all of the tax returns will be getting a refund though. The IRS has said that some will have the overpayment of taxes applied to other debts or taxes due, and for some there will be no change. The agency will send a letter explaining what adjustments were made and the amount, generally within 30 days of the adjustment.


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