IRS says another 1.5M will receive unemployment compensation refunds

WASHINGTON, D.C. - The Interal Revenue Service says that another 1.5 million taxpayers will soon be receiving refunds as it continues to adjust 2020 unemployment compensation because of the American Rescue Plan.

Refunds by direct deposit will begin July 28 and refunds by paper check will begin July 30. This is the fourth round of refunds related to the unemployment compensation exclusion provision. The IRS says that the average refund is about $1,686, higher for this round because the IRS included an adjustment to the Advance Premium Tax Credit (APTC).

Financial Chat: IRS Child Tax Credit and Inflation

Val Majewski with American Benefits Exchange joined Good Day Austin's Casey Claiborne this weekend to talk about the IRS child tax credit as well as the rising cost of gas, food and building materials.

The American Rescue Plan Act of 2021, signed into law by President Joe Biden in March, excluded up to $10,200 in unemployment compensation per taxpayer paid in 2020 The $10,200 is the maximum amount that can be excluded when calculating taxable income; it is not the amount of refunds.

Since May, the IRS says it has issued over 8.7 million unemployment compensation refunds totaling over $10 billion. The IRS will continue reviewing and adjusting tax returns in this category this summer.

The IRS says its review means most taxpayers affected by this change will not have to file an amended return because IRS employees have reviewed and adjusted their tax returns for them. For taxpayers who overpaid, the IRS will either refund the overpayment or apply it to other outstanding taxes or other federal or state debts owed.

However, if taxpayers are now eligible for deductions or credits not claimed on the original return, they should file a Form 1040-X, Amended U.S. Individual Income Tax Return.

Credible talks about making the best use of the child tax credits

What is the best use of child tax credits? Dan Roccato, personal finance expert with Credible, which is majority owned by FOX 7 Austin parent company FOX Corporation, has some advice.

Taxpayers should file an amended return if they:

did not submit a Schedule 8812 with the original return to claim the Additional Child Tax Credit and are now eligible for the credit
did not submit a Schedule EIC with the original return to claim the Earned Income Tax Credit (with qualifying dependents) and are now eligible for the credit
are now eligible for any other credits and/or deductions not mentioned below. Make sure to include any required forms or schedules.

Taxpayers do not need to file an amended return if they:

already filed a tax return and did not claim the unemployment exclusion
have an adjustment, because of the exclusion, that will result in an increase in any non-refundable or refundable credits reported on the original return;
did not claim the following credits on their tax return but are now eligible with the unemployment exclusion: Recovery Rebate Credit, Earned Income Credit with no qualifying dependents or the Advance Premium Tax Credit
filed a married filing joint return, live in a community property state, and entered a smaller exclusion amount than entitled on Schedule 1, line 8

Taxpayers will generally receive letters from the IRS within 30 days of the adjustment, informing them of what kind of adjustment was made and the amount of the adjustment.

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