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May 16, 2021
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If you paid taxes on unemployment benefits you received in 2020, the IRS may owe you a tax refund.

The IRS is now sending payments to nearly 10 million people who paid taxes on unemployment benefits they received when they filed their 2020 tax return. The IRS said it will automatically refund some or all of the money paid. The American Rescue Plan Act included a $10,200 tax break so that unemployment checks aren't counted as earned income during the pandemic. You also can't be taxed on the money.

The IRS started sending refunds to eligible people this week and will continue to do so as it recalculates taxes. The IRS sent the first refunds this week with the remainder going out through the summer as the IRS processes tax returns and reviews taxes paid on unemployment benefits. In addition to the unemployment tax break, the March stimulus bill also extends the weekly $300 bonus unemployment payments, authorizes a third stimulus check (and "plus-up" payments) and boosts the child tax credit to as much as $3,600 per kid.

Twenty-three million Americans filed for unemployment last year, according to the Bureau of Labor Statistics. Under Pandemic Unemployment Assistance, this included people who were laid off as well as gig workers, contractors and self-employed people who don't normally qualify for unemployment insurance. We'll explain the unemployment tax refund and the details we're still waiting to learn. Here's how to see if the IRS owes you extra tax refund money and how to get a $50 discount on your internet bill. This story has been updated with new information.

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