Here's What You Need To Remember: The American Rescue Plan Act contains a $10,200 tax break for unemployment benefits received in 2020, which were not previously deductible. Therefore, the IRS is sending rebates to people who paid taxes on the unemployment benefits (up to $10,200) that they received in 2020.
This week, after nearly completing the distribution of the March 2021 $1400 stimulus checks, the IRS has made another announcement: it is sending out another series of refunds to an additional 10 million people.
The answer is that the IRS assessed taxes in 2020 – the taxes that most people sent in in April 2021 – according to the guidelines from before the American Rescue Plan Act was passed in March. The American Rescue Plan Act contains a $10,200 tax break for unemployment benefits received in 2020, which were not previously deductible. Therefore, the IRS is sending rebates to people who paid taxes on the unemployment benefits (up to $10,200) that they received in 2020.
The IRS has said that it is still in the process of recalculating taxes. It has sent the first refunds out this week, and has indicated that the remainder will arrive periodically throughout the summer. Reasons for the IRS’s delay include a massive paper backlog, persistent staffing shortages, and a number of other checks being sent out – the last of the $1400 checks from March, as well as the onset of the weekly $300 bonus unemployment checks and advance payments on the increased Child Tax Credit.
This rule has the potential to affect millions of Americans. The IRS has estimated that ten million will be able to claim the credit, but twenty-three million filed for unemployment, indicating the number could be higher.
What can you do to speed this process up?
Unfortunately, the answer is probably not much.
The IRS is processing the list automatically, so qualifying taxpayers do not need to take additional action to identify themselves. Moreover, once the judgment has been made that a taxpayer is eligible for a rebate, the check is sent out automatically, with no need to request it. The first refunds were mailed on May 10, and the IRS did not provide an end date, so it is possible that they could continue to come through the summer.
Unfortunately, this refund cannot be tracked through the IRS’s various stimulus tracking tools, such as the Get My Payment tracker on the agency’s website. However, a taxpayer should be able to determine whether he or she is eligible, based on whether his or her tax returns included taxation payments made on unemployment benefits.
If the taxpayer provided bank account information on a prior tax return, the refund will be directly deposited; otherwise, it will be mailed to the last recorded address. If you expect to receive a refund check and you have recently moved, you can update your address with the IRS here.
Trevor Filseth is a news reporter and writer for the National Interest.
This piece first appeared earlier this week and is being republished due to reader interest.