Tax refund for unemployment benefits: When to expect your money and how to check

The American Rescue Plan of 2021 treats the first $10,200 of unemployment benefits received last year (or $20,400 for married couples filing jointly) as nontaxable. What does that mean? Some 13 million taxpayers who paid income tax on that money before the change in the law could now be due for a sum back. The IRS has already issued more than 2.8 million federal refunds to individuals who collected unemployment insurance during the pandemic. 

Late last month, the first round of refunds started going out to single people without dependents. The second round is expected sometime in mid-June. Married couples and taxpayers with dependents will see their IRS money later this summer. The actual amount of the refund will be different for each person. And if you owe taxes or other debts that money may be applied to those balances. We’ll tell you how you might check on your refund online. 

As for other unemployment news, half of US states are opting out of $300 weekly bonus payments while many are offering return-to-work bonuses. And if you’re a parent waiting for your first  child tax credit payment on July 15, calculate how much you could get for your family and three ways to find out whether you qualify, including a new IRS letter about your child tax credit payments. We update this story regularly.

What to know about the unemployment tax break and refunds

The IRS already started sending refunds to taxpayers who received jobless benefits last year and paid taxes on the money. After some frustration with delays in the rollout, many single filers began seeing deposits in their checking accounts starting May 28, with 2.8 million refunds going out the first week of June. The IRS said the next set of refunds will go out in mid-June.

Here’s what to know:

• The tax break is for those who earned less than $150,000 in adjusted gross income. 
• The $10,200 is the amount of income exclusion for single filers, not the amount of the refund. The amount of the refund will vary per person depending on overall income, tax bracket and how much earnings came from unemployment benefits.
• Not everyone will receive a refund. The IRS can seize the refund to cover a past-due debt, such as unpaid federal or state taxes and child support. 
• Refunds started going out in May and will go out in batches through the summer as the agency evaluates tax returns. More complicated returns could take longer to process.
• The IRS is doing the recalculations in two phases, starting with single filers 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.
• If the IRS determines you are owed a refund on the unemployment tax break, it will automatically send a check.
• You don’t 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 TurboTax 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 will send you a notice explaining the corrections within 30 days of when a correction is made.

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Check your unemployment tax refund online

The IRS says eligible individuals should’ve received Form 1099-G from their state unemployment agency showing in Box 1 the total unemployment compensation paid in 2020 (if you didn’t you should request one online). Some states may issue separate forms depending on the jobless benefits — for example, if you received federal pandemic unemployment assistance (PUA). 

The IRS online applications, like the Where’s My Refund tool and the Amended Return Status tool, will not likely provide information on the status of your unemployment tax refund. The IRS also says not to call the agency. 

As far as we know, the easiest way to find out when the IRS processed your refund (and for how much) is by viewing your tax transcript. Here’s how to find it:

1. Visit IRS.gov and log into your account. If you haven’t opened an account with the IRS, this will take some time as you’ll have to take multiple steps to confirm your identity.

2. Once logged into your account, you’ll see the Account Home page. Click View Tax Records.

3. On the next page, click the Get Transcript button.

4. Here you’ll see a drop-down menu asking the reason you need a transcript. Select Federal Tax and leave the Customer File Number field empty. Click the Go button.

5. The following page will show your Return Transcript, Records of Account Transcript, Account Transcript and Wage & Income Transcript for the last four years. You’ll want the 2020 Account Transcript. 

6. This will open a PDF of your transcript: Focus on the Transactions section. What you’re looking for is an entry listed as Refund issued, and it should have a date in late May or June. 

If you don’t have that, it likely means the IRS hasn’t gotten to your return yet. 

IRS unemployment tax refund details still to be determined

The IRS has provided some information on its website about taxes and unemployment compensation. We’re still unclear as to how to contact the IRS if there’s a problem with your tax break refund. If a refund has been issued, you should expect a letter from the IRS within 30 days of the adjustment, which will tell you if it resulted in a refund or if it was used to offset debt. 

Here’s what we do know about contacting the IRS for stimulus check problems. For more on stimulus payments and relief aid, here is information about the child tax credit for up to $3,600 per child and details on who qualifies.