unemployment tax refunds – revised

/ Accounting / By

What are these refunds for?

The American Rescue Plan (ARP), excluded the first $10,200 of 2020 unemployment benefits ($20,400 for MFJ) from your taxable income. Millions of taxpayers may be eligible for an adjustment (possible refund) because they overpaid when filing before the ARP was passed. The refunds started going out in June and will continue until the end of the summer. The IRS has estimated there are 13 million taxpayers who may be eligible for an adjustment. A massive IRS backlog of 35 million returns to process has slowed the adjustment process.

Refund Facts
  • If you have received a refund your bank account would show an “IRS TREAS 310 TAX REF” description. This is typically used for tax refunds.
  • The income exclusion is only for those who earned less than $150,000 in adjusted gross income.
  • The income exclusion is $10,200 for single filers, not the amount of the refund. The amount of the refund will vary per person.
  • The IRS is doing the recalculations in two phases, starting with single filers then moving to married filing jointly filers.
  • Most people don’t need to file an amended return to claim the exemption.
How to find the status of your refund

The IRS will send a notice when your return is corrected for the unemployment compensation exclusion. The notice will be mailed to the address on file. Usually, the notice is issued within 30 days of when the correction is made. Do NOT call the IRS to check on the status.

The only way to see if the IRS processed your refund, and the amount, is by viewing your tax records.

Here’s how to check online:
    1. Visit IRS.gov and open or log in to your account. Opening an IRS account will take some time, as you need 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. See the 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 a 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 see this transcript, it likely means the IRS hasn’t processed your return adjustment yet.

Common Refund Questions (per the IRS)
If the exclusion adjustment results in an overpayment (refund), how will it be issued?

Any refund resulting from the exclusion adjustment will be issued to you in one of the following ways:

If bank account information is on file, the refund will be issued by direct deposit to that bank account. (Note: If the account is no longer valid or is closed, the bank will return your refund to the IRS and a check will be mailed to the address the IRS has on file.)

If the IRS doesn’t have any bank account information for you, then the refund will be mailed to the address on file.

If the exclusion adjustment results in a refund, will the IRS use the refund to pay (offset) any unpaid debts?

Yes. This means not everyone will receive a refund.

Unpaid debts include past-due federal tax, state income tax, state unemployment compensation debts, child support, spousal support, or certain federal nontax debts, such as student loans. If the refund is used to pay unpaid debts, the IRS will send a notice to inform you of the offset.

You receive a CP 21 or 22 notice saying your 2020 account was adjusted due to the exclusion adjustment.

The notice is informing you that the IRS changed your tax return to correct unemployment compensation because of recent changes in tax laws, rulings, or regulations and as a result, you’ll receive a refund, you’ll have a reduced balance due, or neither (no refund due nor amount owed).

Who needs to file an amended return

If the unemployment exclusion now makes you eligible for a credit or deduction not claimed on your original return, then you need to file an amended return to claim the new credit or deduction.

Amendment NOT required to claim:
    • Recovery Rebate Credit
    • Earned Income Tax Credit with no qualifying dependents
    • Advanced Premium Tax Credit
Amendment required to claim:
    • Taxable Social Security Benefits (Social Security Benefits Worksheet in the Instructions for Form 1040 and 1040-SR)
    • IRA Deduction (IRA Deduction Worksheet in the Instructions for Schedule 1 in the Instructions for Form 1040 and 1040-SR)
    • Student Loan Interest Deduction (Student Loan Interest Deduction Worksheet in the Instructions for Schedule 1 in the Instructions for Form 1040 and 1040-SR)
    • The exclusion of Interest from Series EE and I U.S. Savings Bonds issued after 1989 (Form 8815)
    • The exclusion of Employer-Provided Adoption Benefits (Form 8839)
    • Tuition and Fees Deduction (Form 8917)
    • The deduction of up to $25,000 for active participation in a Passive Rental Real Estate Activity (Form 8582)
If you are in need of an amended return, let Raleigh Accounting & Tax LLC resolve that for you. Contact us and we can discuss your original return, and get your return amended.