Refunds on Tax-Free Unemployment to be Issued Automatically

COVID-19 has impacted nearly everything, and businesses haven’t been immune either. Millions of US workers who suddenly found themselves unemployed last year welcomed unemployment benefits to help cover costs. But many were shocked afterwards to realize that they owed taxes even on these unemployment benefits.

However, the recent American Rescue Plan Act (ARPA) provided the good news that recipients do NOT owe tax on up to $10,200 of unemployment benefits. This, in turn, created another concern for those early filers who already submitted their tax returns prior to March 11, when ARPA became law.

But by the time this law passed, smack in the middle of tax season, some people who received these benefits had already filed and paid taxes on those benefits.

Earlier, the IRS urged these taxpayers not to file amended returns just yet.

Now, the IRS has announced some more good news. These early filers do not have to worry about filing an amended return at all.


The IRS Commissioner Chuck Rettig has announced that his agency will automatically send refunds to eligible tax filers. 

“We believe that we will be able to handle this on our own. We believe that we will be able to automatically issue refunds associated with the $10,200,” Rettig told the tax-writing subcommittee members.

This saves those early filers and their tax preparers added hassle, which is a welcome move.

As for people who received unemployment income in 2020 but have NOT yet filed their tax return, the IRS released new instructions for them. This includes a worksheet for paper filers and the IRS will work with online tax programs to update software as well.

Have you filed your taxes?

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