WASHINGTON - The Internal Revenue Service recently sent 430 refunds out of a total of more than $ 510 million to taxpayers who paid unemployment compensation taxes excluded from 2020 income.

IRS efforts to correct overpayments of unemployment compensation will help most affected taxpayers avoid filing an amended tax return. So far, the IRS has identified more than 16 million taxpayers who may be eligible for the adjustment. Some will receive refunds, while others will have the overpayment applied to taxes owed or other debts.

The American Rescue Plan Act (ARPA) of 2021, enacted in March, excluded from tax the first $ 10,200 in taxpayer unemployment compensation paid in 2020. The $ 10,200 is the amount excluded when calculating your adjusted gross income (AGI) ; it is not the amount of the refund. The exclusion applied to individuals and married couples whose modified adjusted gross income was less than $ 150,000

Earlier this year, the IRS began its review of tax returns filed prior to the enactment of ARPA to identify tax-free unemployment compensation. To date, the IRS has issued more than 11.7 million refunds totaling $ 14.4 billion. This latest batch of corrections affected more than 519 returns, with 430 taxpayers receiving refunds averaging about $ 1,189.

The return review and correction processing is almost complete, as the IRS has already reviewed the simpler returns and is now concentrating on more complex returns. The IRS plans to issue another batch of corrections before the end of the year.

Affected taxpayers will generally receive letters from the IRS within 30 days of the adjustment, informing them what type of adjustment was made (refund, IRS debt paid, or other authorized debts paid) and the amount of the adjustment.

The IRS is also making corrections for the Earned Income Tax Credit, Additional Child Tax Credit, American Opportunity Credit, Premium Tax Credit, and Refund Recovery Credit affected by the exclusion. Most taxpayers don't have to do anything, and they don't need to call the IRS. The IRS will send notices in November and December to people who did not claim the Earned Income Tax Credit or Additional Child Tax Credit, but may now be eligible for them.

These notices are not a confirmation that they are eligible for these credits, but a response from the taxpayer is required if they are eligible instead of filing an amended return. For taxpayers who become eligible for other credits and / or deductions after the exclusion is calculated but not claimed on their original return, they must file a Form 1040-X, Amended U.S. Tax Return to claim any new benefit.

See the 2020 Unemployment Compensation Exclusion FAQs for more information, including details on how to file an amended tax return.