IRS sends out 1.5 million ‘surprise’ tax refunds


A U.S. Treasury check and a tax document are seen in a file photo. (iStock/Getty Images Plus)

The IRS has started to distribute another round of refunds to some taxpayers who received unemployment benefits last year, the agency announced Wednesday

Approximately 1.5 million taxpayers will receive refunds averaging $1,686 as part of adjustments made to previously filed income tax returns. This round included an adjustment to the advance premium tax credit and therefore the average refund amount was higher than previous disbursements, according to an IRS news release.

Refunds made by direct deposit began Wednesday and paper checks will start Friday.

This is the fourth round of refunds related to the unemployment compensation exclusion provision that was part of the federal COVID-19 relief plan earlier this year.

Since May, more than 8.7 million refunds totaling over $10 billion have been issued. Additional payments are possible, however, as the tax agency continues to review and adjust returns through the summer, according to the IRS.

Most eligible taxpayers will not need to take any action to receive their refund.

“To ease the burden on taxpayers, 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,” the agency said in a statement earlier this month. “For taxpayers who overpaid, the IRS will either refund the overpayment, apply it to other outstanding taxes or other federal or state debts owed.”

More than 10 million people submitted their 2020 returns before the American Rescue Plan Act was signed into law in March, the IRS said earlier this year. Under the legislation, the first $10,200 of unemployment compensation received in 2020 is excluded from taxable income.

“The IRS will send taxpayers a notice explaining the corrections, which they should expect within thirty days of when the correction is made,” the news release stated. “Taxpayers should keep any notices they receive for their records.”

The IRS noted that any single or married individual with a modified adjusted gross income of over $150,000 is not eligible for the tax exemption. The agency also said that “not all adjustments will result in a refund.”

In some cases, taxpayers may need to file an amended return if they are now eligible for deductions or credits not originally claimed on their return.

Taxpayers getting an adjustment will typically receive a letter from the IRS within 30 days prior to the payment.