Optima Tax Relief Highlights 430,000 IRS Refunds Related to Unemployment Compensation

Taxpayers that received unemployment and paid taxes on their benefits are being awarded a refund from the IRS. Optima Tax Relief highlighted the news of approximately 430,000 refunds paid by the IRS; more than $510 million dollars. This refund was specifically for the 2020 tax year.

What to do if you were overpaid by the IRS

The IRS has decided to allow taxpayers to keep the overpayments, but there is a caveat. The IRS will take the overpayment out of your next refund. While some taxpayers may receive the overpayment as a refund, if you have an overdue tax debt then the IRS will apply the overpayment to your balance. So far, as many as 16 million taxpayers were found to be eligible for the adjustment.

The American Rescue Plan Act (ARPA) 2021

In March, ARPA was enacted and excluded the first $10,200 in unemployment compensation per taxpayer. To identify the excludible unemployment compensation, the IRS began to review tax returns filed prior to the enactment of ARPA. The IRS has since issued over 11.7 million refunds, over $14.4 billion. Of those returns, 519,000 were affected by the latest corrections. 430,000 taxpayers received refunds of about $1,189.

Reviewing Returns

The IRS is nearly done reviewing and processing corrections, wrapping up with the most complicated returns. If your return was impacted, you will receive letters from the IRS within 30 days of the adjustment. The letters will inform you of what kind of adjustment was made (refund, debt payment, offset, etc.) with the amount.

Optima Tax Relief wants taxpayers to know that you likely won’t be required to act or call the IRS when a correction is made. Credit corrections that were affected by the exclusion. These credit programs include Earned Income Tax Credit, Additional Child Tax Credit, American Opportunity Credit, Premium Tax Credit and Recovery Rebate Credit.

Notices were sent in November, and more will be sent throughout December to notify you of your eligibility for Earned Income Tax Credit and Additional Child Tax Credit if you didn’t claim them on your last return.