GREENSBORO, N.C. — Does Uncle Sam owe you money? Get ready. The IRS confirms
nearly four million refunds for unemployment compensation overpayments are on their way.
The refunds will begin by direct deposit on July 14, 2021, and refunds by paper check go out on July 16, 2021. These refunds on average are about $1,265.
Most taxpayers will not have to take any action to get their overpayment refund, but there are some taxpayers who should file an amended return. Here is the guidance from the IRS:
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 after the unemployment compensation exclusion;
- 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 after the unemployment compensation exclusion;
- 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; the IRS will determine the correct taxable amount of unemployment compensation and tax;
- 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 when the unemployment exclusion is applied: Recovery Rebate Credit, Earned Income Credit with no qualifying dependents or the Advance Premium Tax Credit. The IRS will calculate the credit and include it in any overpayment;
- 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.
WHY ARE WE GETTING THIS REFUND?
If you're wondering if you'll get this refund or why folks are getting it, The American Rescue Plan allowed taxpayers to exclude up to $10,200 in unemployment benefits from their Adjusted Gross Income. Because of that, taxpayers didn't have to pay taxes on that income, but the legislation took effect after many filed returns and paid that tax, which is why the IRS is now having to give refunds.
CAN THIS REFUND BE GARNISHED? The IRS confirms:
These refunds are subject to normal offset rules, such as past-due federal tax, state income tax, state unemployment compensation debts, child support, spousal support, or certain federal nontax debts (i.e., student loans). The IRS will send a separate notice to the taxpayer if the refund is offset to pay unpaid debts.