IRS Readies Refunds for Unemployment Compensation Overpayments

Theresa FerroneUncategorized

The Internal Revenue Service announced today it will issue another round of refunds this week to nearly 4 million taxpayers who overpaid their taxes on unemployment compensation received last year.

The American Rescue Plan Act of 2021, which became law in March, excluded up to $10,200 in 2020 unemployment compensation from taxable income calculations. The IRS has been reviewing the Forms 1040 and 1040SR that were filed prior to the law’s enactment to identify those people who are due an adjustment. For taxpayers who overpaid, the IRS will either refund the overpayment, apply it to other outstanding taxes or other federal or state debts owed.

Most taxpayers need not take any action and there is no need to call the IRS. However, if, as a result of the excluded unemployment compensation, taxpayers are now eligible for deductions or credits not claimed on your original 2020 tax return, you should file a Form 1040-X, Amended U.S. Individual Income Tax Return. Note: Form 1040-X is not the easiest form to complete nor is determining if you are eligible for tax deductions and / or tax credits. You are welcome to contact us If you need assistance.