The tax authorities are handing out extra refund checks this week to about 1.5 million taxpayers who received unemployment benefits in 2020, meaning some Americans will soon have extra cash in their pockets.
These refunds are for taxes paid on unemployment benefits received last year. Unemployment benefits are usually fully taxable. But the Biden administration’s US bailout plan, passed in March 2021, exempts up to $10,200 from tax breaks for individuals and married couples who earned less than $150,000 in 2020.
As a result, many people who have received unemployment benefits in 2020 – if only for a single week – will receive extra money.
According to the IRS, the average refund check for this round is $1,686. The agency has filed for 8.7 million Americans on unemployment tax returns as of May and continues to do so as it reviews the returns.
In most cases, taxpayers do not need to take any action to receive the unemployment benefit exclusion, as the refunds are made automatically.
However, the IRS has said that some individuals and families may now be eligible for additional deductions and credits not claimed on their original tax return. This include the following groups::
- Taxpayers who have not filed Schedule 8812 to claim the additional child tax credit and who are now eligible for the discount
- Taxpayers who have not filed a Schedule EIC with the original return to claim the Earned Income Tax Credit (with eligible dependents) and who are now eligible for the credit
- Taxpayers who are now eligible for any other deductible items and/or deductible items as a result of the adjusted income
Direct deposits of the tax refunds began on July 28, and paper checks for unemployment tax refunds will be sent on July 30.
Change term child discount
The first round of direct deposits and paper checks through the extended children’s discount dated almost two weeks ago, and eligible families have until August 2 to change their transfer information or unsubscribe from prepayments prior to the August payout.
Families who fall into one of the following categories may consider opting instead for a flat-rate credit on their 2021 tax return:
- Those who expect their income to be too high in 2021 to qualify for the child discount
- Those whose children are claimed on someone else’s tax return
- Those whose primary residence was outside the US for more than half of 2021
To update or change your information and elections, go to the Child Tax Credit Update Portal at IRS.gov.