More people are about to get a surprising response from the IRS soon

More people are about to get a surprising response from the IRS soon

New stimulus checks were among the elements of the signing of legislation signed by President Biden in March, a $1.9 trillion bill informally known as the "American Bailout." But as we've emphasized across multiple posts, there are many things included in this consequential law. Not only more stimulus checks but also an expanded children's tax credit. Plus, the requirement caused the IRS to start sending some surprising refunds to a few million Americans. Specifically, unemployment tax refunds.

Unemployment Tax Refund - More Coming Soon

Here's what happens. Usually, when someone withdraws unemployment benefits, the IRS calculates this as taxable income the following year. However, the US bailout also included a provision that would exclude a portion of people's unemployment income from last year for tax purposes. This is good news...unless you file your taxes early this year. Earlier, as in, before the legislation took effect from March with this provision.

No need to worry, though. If you fell into this bucket, you wouldn't have to do anything to rectify the problem (the problem, again, is that you would have paid taxes on some unemployment income that the stimulus bill excludes). The IRS has begun to recalculate the affected tax returns. They send refunds, when applicable.

The IRS says that "taxpayers will generally receive letters from the IRS within 30 days of the adjustment, informing them of the type of adjustment that was made (such as refunding, paying off IRS debt or paying off other authorized debts) and the amount of the adjustment."

what do you know?

As noted, the IRS has already started sending unemployment tax refunds due to the provision in the stimulus act. A few days ago, the IRS said it sent out about 4 million responses.

The IRS has already identified about 4.6 million taxpayers and has proceeded to amend their tax returns. After doing this, 4 million applicants were to be redeemed. The average payback, according to the tax agency, was $1,265 this round. And this being moderate means that some people got more, and some people got less. Also, some people didn't get a response at all as a result of the recalculation.

Note: The IRS has not yet said when we can expect the next batch of refunds. However, the IRS says it plans to send more refunds "all summer." Also, July 16 was the first date that paper copies of checks were sent out for unemployment tax refunds from the last round. So some of those may still need another day or so to arrive by mail.