What is IRS TREAS 310 and how is it related to 2020 tax returns?
The IRS is currently in the process of issuing tax refunds for millions of unemployment benefits recipients who incorrectly paid tax on their 2020 filing.
In recent weeks millions of Americans will have noticed a new payment in their bank accounts, with a transaction listed simply as IRS TREAS 310. Although not everyone receiving the payments will have been aware that they were coming, this code refers to IRS tax refunds.
The ‘310’ identifies the payment as a tax refund and the source of the payment is pretty clear. Typically you would have to claim for a tax refund when completing your annual filing to receive a tax refund, but a new clause included in the recent stimulus bill has opened it up for many more people this year.
Unemployment benefits for 2020 are now tax-free
The American Rescue Plan comprised a whopping $1.9 trillion of federal funding when it was signed into law in March and included a huge variety of programmes. One little-known provision made the first $10,200 of unemployment benefits received during 2020 completely tax-free, which is the source of many of the IRS TREAS 310 payments.
Because the American Rescue Plan was not passed until March, millions of unemployment benefits recipients had already completed their tax filing by that point. This means that they will have mistakenly paid tax on the jobless support.
To rectify this, the IRS has gone through last year’s filings and is now distributing tax refunds to anyone who overpaid. The IRS is also having to recalculate the 2020 tax bill for recipients of Earned Income Tax Credit, Premium Tax Credit and Recovery Rebate Credit, which may also explain why you have received an IRS TREAS 310 payment.
How many people will receive an IRS TREAS 310 payment?
The pandemic has had a catastrophic effect on the American economy over the last 15 months with unemployment peaking at 14.8% in April 2020. Since then the US jobs market has gradually started to recover but unemployment was still at 6.7% by the end of 2020.
This has meant that a huge number of people have had to rely on unemployment benefits at some point, and therefore the number eligible for the unemployment benefits tax refund, is huge. A recent statement from the IRS said they have identified 13 million taxpayers who are eligible for a payment.
On 4 June the tax authority confirmed that a batch of more than 2.8 million refunds had been sent out to those who had overpaid tax on their unemployment benefits. The latest report said that the next set of refunds is due to be distributed in mid-June, meaning that it is likely to arrive soon.