How to get one of these tax refunds
Here's the story behind the surprise refunds: Millions who lost their jobs because of the pandemic last year (including some who might still be looking for work) were forced to file for unemployment as businesses closed or cut back operations.
Normally, jobless benefits are taxed like any other income. But the COVID-19 rescue package Biden signed in March makes up to $10,200 in 2020 unemployment compensation tax-free for individual taxpayers. Couples filing jointly get a $20,400 exclusion.
If you collected unemployment last year and filed taxes ahead of Biden's relief law, you may have overpaid based on what you thought you owed. So, you may have a surprise refund coming, though only if your adjusted gross income (total income minus a few deductions) was under $150,000.
Some 40 million Americans received unemployment payments in 2020, according to the Century Foundation, and the average beneficiary got $14,000. Of that, $10,200 is now tax-free — leaving only $3,800 that's taxable.
As of early June, the IRS had identified 13 million taxpayers who may be eligible for the adjustment. If you've been hoping for a fourth stimulus check, one of these refunds might be the next best thing, for now.
Surprise refunds will keep coming in groups
"The IRS plans to issue the next set of refunds in mid-June," the agency said on June 4 when it announced the first group. There's been no further word since then — meaning more taxpayers will be in for refund surprises next week, during what still might be considered mid-June.
Distribution will continue throughout the summer.
If you qualify for money back, you’ll receive the refund as a direct deposit or — if the government doesn't have your banking information — a paper check. The funds also may be applied to any taxes or other federal debts you owe. The IRS is automatically issuing the refunds, so there’s nothing you need to do to get yours.
The deadline to file your 2020 taxes was extended until May 17. If you missed the deadline, you should file your taxes now — and remember that unemployment benefits of up to $10,200 from last year are exempt from taxes. That could reduce your tax liability significantly.
Keep in mind that even though the IRS has waived some federal taxes on your jobless benefits, your state may charge income tax on all unemployment payments you received.
What if you're not likely to get a refund?
If you don't think you're eligible for a refund and could use more cash right now, there are several places you might find it.
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