They may not be considered $1,400 coronavirus stimulus checks, but the tax refunds on 2020 unemployment benefits have the potential to boast an even greater monetary amount.  

And what should be great news for those who have been waiting patiently for weeks, the Internal Revenue Service has finally confirmed that the refunds will start being sent out to eligible Americans this week.  

This new cash windfall was green-lighted through President Joe Biden’s $1.9 trillion American Rescue Plan, which was able to waive federal tax on up to $10,200 of unemployment benefits—or $20,400 for married couples filing jointly—that were collected last year.  

Keep in mind that unemployment benefits are typically treated as taxable income, according to the IRS.  

The agency added that as many as ten million people potentially overpaid on their unemployment taxes and could be in line for sizable refunds. 

A recent Treasury report stated that approximately 7.3 million tax returns already processed by the IRS appear to qualify for the tax refunds.

“Of the 7.4 million tax returns, nearly 7.3 million—or 98.6 percent—had modified adjusted gross income of less than $150,000 and would likely qualify for the exclusion,” the report stated. 

The IRS has reminded taxpayers that American households with $150,000 or more in earned income are ineligible for the new benefits.  

For those who qualify, the agency added that it will issue the refunds automatically.

“Because the change occurred after some people filed their taxes, the IRS will take steps in the spring and summer to make the appropriate change to their return, which may result in a refund,” the IRS stated. 

“Any resulting overpayment of tax will be either refunded or applied to other outstanding taxes owed,” the agency added.  

Be warned that married couples who file a joint tax return may have to wait longer than individual taxpayers to receive the refund—perhaps not until late summer.   

IRS officials have said that this is largely because of the higher complexity of calculating their refunds. The agency is expected to disburse the refunds in two phases—and most married couples who filed jointly will be part of the second phase.  

Much like last year, the IRS has struggled to quickly process returns this tax season. There have been reports that the average wait time for a tax refund has ranged from six to eight weeks, which is much longer than the typical wait of three weeks or less. For those who have submitted via mail, the IRS says that it could take even longer.  

As of May 7, roughly eighty-five million of the tax returns submitted led to refunds, typically amounting to about $3,000.  

Ethen Kim Lieser is a Minneapolis-based Science and Tech Editor who has held posts at Google, The Korea Herald, Lincoln Journal Star, AsianWeek, and Arirang TV. Follow or contact him on LinkedIn.  

Image: Reuters