The Internal Revenue Service is distributing almost 12 million tax refunds to taxpayers after corrections made to their 2020 tax returns.
The refunds, adding up to $14.8 billion and averaging nearly $1,232 each, were distributed to taxpayers who paid too much on unemployment compensation in 2020.
The IRS noted that the American Rescue Plan Act of 2021, which went into effect under President Joe Biden in March 2021, left out “up to $10,200 in unemployment compensation from taxable income calculations.”
This affected single taxpayers and married individuals whose modified adjusted income was less than $150,000 in 2020.
Thus, the IRS has been checking through Forms 1040 and 1040-SR submitted prior to the American Rescue Plan Act becoming a law.
The IRS stated that they have corrected close to 14 million returns; however, some taxpayers’ overpayment money went straight towards taxes owed or other debts.
Impacted taxpayers should receive an email about the corrections. The IRS has emphasized keeping the letter for tax documentation.
On the other hand, eligible taxpayers who don’t get a correction letter from the IRS may have to file an amended 2020 tax return in order to receive the refund.
More information can be found on the IRS website.