Extra Tax Refunds From IRS: How to See If You Overpaid Taxes in 2020
Americans who paid too much taxes on unemployment benefits are receiving nearly $15 billion back.
The average extra refund from 2020 is a little more than $1,200.
Though the early months of the COVID-19 pandemic were almost three years ago, the Internal Revenue Service continues to deal with the effects of the new coronavirus on the US economy and tax system in 2020.
The IRS announced last week that it has completed its corrections of 14 million tax returns of filers who had overpaid taxes on unemployment compensation in 2020, when COVID-related legislation excluded up to $10,200 from taxable income calculations per individual. The corrections resulted in nearly 12 million refunds averaging $1,232 each, for a total of $14.8 billion.
Although the IRS said it finished its review of taxes from 2020, there may be taxpayers who filed their returns before the law was enacted in spring 2021 who didn't receive an automatic correction but are still eligible for a refund.
If you overpaid taxes on unemployment compensation received in 2020, you'll now need to file an amended tax return for 2020 to claim the money the IRS owes you.
Learn more about why the IRS issued unemployment refunds, how you can see if you are eligible for one and how to claim the taxes you overpaid.
For more tax tips, learn when income taxes are due in 2023 and all the tax breaks you can get if you own a home.
Why did the IRS send refunds from unemployment compensation received in 2020?
The COVID-19 relief legislation known as the American Rescue Plan was signed into law by President Joe Biden in March 2021. The law allowed for a tax break: The first $10,200 of 2020 jobless benefits ($20,400 for married couples filing jointly) was made nontaxable income for the 2020 tax year.
However, many Americans had already filed their taxes by the time the law was passed, meaning that millions overpaid taxes on their unemployment income and were owed money back.
The IRS began sending additional tax refunds for those unemployment corrections in May 2021, and it announced in Nov. 2021 that it had issued 430,000 additional refunds. The Jan. 6 announcement shows the full scale of the corrections, with nearly 12 million total refunds related to 2020 unemployment compensation.
Americans whose returns were corrected by the IRS should receive a special letter explaining the changes. But now that the IRS has finished correcting 2020 tax returns, if you overpaid taxes on unemployment income for that year, you'll need to file an amended tax return to claim it.
Keep in mind that the tax break is for individuals who earned less than $150,000 in adjusted gross income and only for unemployment insurance received during 2020 and not in 2021. Also note that the IRS could have seized the refund to cover a past-due debt, such as unpaid federal or state taxes and child support.
How can I see if I overpaid taxes on unemployment benefits in 2020?
The best way to check your tax return from 2020 is by using an online IRS account. It takes a few minutes to register, but after you're set up, you can access all sorts of useful information, like your current adjusted gross income, your payment history and transcripts of your old tax returns, including 2020.
After you receive your 2020 tax transcript, check Form 1040 Schedule 1 Line 8 to see if you included the unemployment compensation exclusion. If you received jobless benefits and didn't enter an exclusion, use the "Unemployment Compensation Exclusion Worksheet" in the instructions for the 2020 version of Schedule 1 (it's on page 88) to calculate the amount.
If you received unemployment income in 2020 and did not claim the exclusion even though you were eligible, you could get additional tax refund money from the IRS by filing an amended return.
If you didn't receive any jobless benefits in 2020 or included the exclusion in your tax return for that year, you're not eligible for any additional refund related to unemployment.
If I overpaid taxes on unemployment income in 2020, how can I claim money back from the IRS?
Because the IRS has completed its corrections of overpayment of taxes on unemployment benefits from 2020, you'll need to file an amended tax return for that year. To file an amended return, use Form 1040-X, which is included in all the best tax software.
You can generally file an amended tax return with the IRS up to three years after you filed the original return, or two years after you paid taxes due (whichever is later). If you filed on time, your filing date is considered to be the tax deadline -- July 15 in 2020 -- so you should have until July 15, 2023, to file an amended return.
Along with Form 1040-X, you'll also need to complete and refile both IRS Forms 1040 and 1040 Schedule 1. The IRS generally estimates about 16 weeks for processing amended returns, but due to COVID-19 delays, the agency is now estimating more than 20 weeks. As of Dec. 20, 2022, the IRS had a backlog of 454,000 unprocessed Forms 1040-X.
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