IRS Refunds for Unemployment Exclusion

On March 31, 2021, in IR-2021-71, the IRS announced that it will begin sending refunds to taxpayers who received unemployment benefits and are eligible for the exclusion on up to $10,200 of benefits but who filed their tax return before the recent changes made by the American Rescue Plan.

Such refunds will occur in the spring and summer, starting in May 2021. 

The IRS indicated that, for taxpayers who already have filed and figured their tax based on the full amount of unemployment compensation, the IRS will determine the correct taxable amount of unemployment compensation and tax.  Any resulting overpayment of tax will be either refunded or applied to other outstanding taxes owed.

The IRS also indicated that it will first process refunds for taxpayers who are eligible for the up to $10,200 exclusion.  It will then process refunds for married couples who each received unemployment compensation where the couple can exclude up to a combined $20,400 (but not more than $10,200 for each spouse).