IRS starts issuing refunds on paid unemployment tax.

Fast Facts for May 14, 2021

It’s happening – starting this week!

If you paid taxes on the first $10,200 dollars of your unemployment benefit – the IRS says the first batches of refunds will be issued this week and will continue throughout the summer.

So far – the IRS has identified more than 10 million taxpayers who qualify for this benefit that was made possible by the American Rescue stimulus act that was signed into law in March.

The law says the first $10,200 dollars of your 2020 unemployment benefit is tax free if you are a single filer and the first $20,400 is tax free if you file married and both of you were on unemployment.

To qualify for a refund you must–

– have an adjusted gross income of less than $150,000 dollars,

– have already filed and paid your 2020 taxes

– have been on unemployment in 2020

Now, if you qualify – that doesn’t mean you’re going to get $10,200 back. It means, if you qualify, you’ll get back the *taxes* you paid on the first $10,200. Any more unemployment benefit you received in 2020 above $10,200, you will still pay taxes on that.

The IRS says the refunds will be automatically recalculated based on your 2020 tax return and will be issued in phases.

The first phase will go to single filers who have the simplest returns.

For those who gave the IRS their banking information, you’ll receive your money back in a direct deposit. If you didn’t, you’ll get a paper check mailed to you. You’ll also receive a notice within 30 days explaining the recalculation.

These refunds can be garnished if you owe past federal taxes, state income taxes, state unemployment compensation debts, child support, spousal support and certain federal nontax debts like student loans. If your refund is garnished, you’ll receive a separate notice explaining where your money went.

More IRS details on the tax free unemployment here.

IRS FAQ on unemployment here.