Unemployment tax refund and IRS payment schedule: Everything to know

Millions of Americans who got unemployment benefits could be getting some extra money back from the IRS. 

Angela Lang/CNET

Will you get a refund from the IRS this summer? It’s possible if you paid taxes on the unemployment benefits you received in 2020 due to the pandemic. Unemployed workers can’t be taxed on that benefit money due to new rules under the American Rescue Plan. The agency began sending out refund checks earlier in May and will continue through the summer months. 

The new law came into effect after millions had already filed their income tax returns, however, so taxpayers are now eligible for an IRS tax refund for the first $10,200 of single filers’ income. Those refunds started going out earlier in May, but they’re not being sent out as quickly as the third stimulus checks. The IRS is processing tax returns and is reviewing the taxes paid on unemployment insurance. The agency said refund amounts will vary; not every adjustment will result in a refund. We’ll explain the unemployment tax exemption here and tell you what we still don’t know. 

You’ll also want to read up on the states opting out of the $300 bonus unemployment payments and other jobless benefits programs. If you’re wondering about other money you might be entitled to receive, here are some details about the enhanced child tax credit, how much you could get and information about the upcoming IRS child tax credit portals. This story has been updated.

What is the unemployment tax refund? 9 things to know

The IRS says it started sending unemployment refunds to taxpayers who treated their benefit payments as income starting earlier this month. Here’s what you can expect.

  • The tax break is for those who earned less than $150,000 in adjusted gross income.
  • Refunds started going out the week of May 10 according to the IRS and will run through the summer, as the agency evaluates tax returns. More complicated returns could take longer to process. Those waiting for checks have posted their frustration on Reddit and Twitter over the slow rollout. 
  • If the IRS determines you are owed a refund on the unemployment tax break, it will automatically send a check.
  • You do not need to file an amended return to claim the exemption. (Here’s how to track your tax return status and refund online.) Some who used tax software such as Turbo Tax said they have seen their refund amount change due to the unemployment refund, although they have yet to see a check. 
  • Refunds will go out as a direct deposit if you provided bank account information on your 2020 tax return. Otherwise, the refund will be mailed as a paper check to the address the IRS has on hand.
  • The IRS is doing the recalculations in two phases, starting with those who are eligible for the up to $10,200 tax break. It will then adjust returns for those married-filing-jointly taxpayers who are eligible for the up to $20,400 tax break.
  • The IRS will send you a notice explaining the corrections within 30 days of when a correction is made.
  • You won’t be able to track the progress of your refund through the IRS Get My Payment tracker, the Where’s My Refund tool, the Amended Return Status tool or another IRS portal.
  • The IRS can seize the refund to cover a past-due debt, such as unpaid federal or state taxes and child support.

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Details we still don’t have about the unemployment tax refund

The IRS has provided some information on its website about taxes and unemployment compensation. We are still unclear as to how to contact the IRS if there’s a problem with your tax-break refund. (Here’s what we know about contacting the IRS about stimulus check problems.) We’ve reached out to the IRS for clarification. 

For more, here’s everything to know about the child tax credit for up to $3,600 per child and who qualifies.