After more than three months since the IRS last sent adjustments on 2020 tax returns, the agency finally issued 430,000 refunds on Monday to those who qualify for the unemployment tax break. In total, over 11.7 million refunds have been issued, totaling $14.4 billion. The IRS says it plans to issue another batch by the end of the year.
Here's a summary of what those refunds are about: The first $10,200 of 2020 jobless benefits ($20,400 for married couples filing jointly) was made nontaxable income by the American Rescue Plan in March, so taxpayers who filed their returns before the legislation and paid taxes on those benefits are due money back.
We'll tell you how to access your IRS tax transcript and why you should look out for an IRS TREAS 310 transaction on your bank statement. If you're a parent receiving the child tax credit this year, check out how it could affect your taxes in 2022. This story has been updated recently.
What to know about the unemployment tax break
The first thing to know is that refunds would only go to taxpayers who received jobless benefits last year and paid taxes on that money before the provision in the American Rescue Plan Act of 2021. The tax break is for those who earned less than $150,000 in adjusted gross income and for unemployment insurance received during 2020. At this stage, unemployment compensation received this calendar year will be fully taxable on 2021 tax returns.
The $10,200 tax break is the amount of income exclusion for single filers, not the amount of the refund (taxpayers who are married and filing jointly could be eligible for a $20,400 tax break). The amount of the refund will vary per person depending on overall income, tax bracket and how much earnings came from unemployment benefits. So far, the refunds have averaged more than $1,600.
However, not everyone will receive a refund. The IRS can seize the refund to cover a past-due debt, such as unpaid federal or state taxes and child support. One way to know if a refund has been issued is to wait for the letter that the IRS is sending taxpayers whose returns are corrected. Those letters, issued within 30 days of the adjustment, will tell you if it resulted in a refund or if it was used to offset debt.
As the IRS continues issuing refunds, they will go out as a direct deposit if you provided bank account information on your 2020 tax return. A direct deposit amount will likely show up as IRS TREAS 310 TAXREF. Otherwise, the refund will be mailed as a paper check to whatever address the IRS has on hand.
The IRS has put together a FAQ page if you have questions about eligibility. The IRS says eligible individuals should've received Form 1099-G from their state unemployment agency showing in Box 1 the total unemployment compensation paid in 2020. (If you didn't, you should request one online from that agency.) Some states may issue separate forms depending on the jobless benefits -- for example, if you received federal pandemic unemployment assistance, or PUA.
IRS schedule for unemployment tax refunds
With the latest batch of payments on Nov. 1, the IRS has now issued more than 11.7 million unemployment compensation refunds totaling over $14.4 billion. The IRS announced it was doing the recalculations in phases, starting with single filers with no dependents and then for those who are married and filing jointly. The first batch of these supplemental refunds went to those with the least complicated returns in early summer, and batches are supposed to continue for more complicated returns, which could take longer to process.
Watch this: Your tax questions answered in 3 minutes
How to track your refund and check your tax transcript
The first way to get clues about your refund is to try the IRS online tracker applications: The Where's My Refund tool can be accessed here. If you filed an amended return, you can check the Amended Return Status tool.
If those tools don't provide information on the status of your unemployment tax refund, another way to see if the IRS processed your refund (and for how much) is by viewing your tax records online. You can also request a copy of your transcript by mail or through the IRS' automated phone service by calling 1-800-908-9946.
Here's how to check your tax transcript online:
1. Visit IRS.gov and log in to your account. If you haven't opened an account with the IRS, this will take some time as you'll have to take multiple steps to confirm your identity.
2. Once logged in to your account, you'll see the Account Home page. Click View Tax Records.
3. On the next page, click the Get Transcript button.
4. Here you'll see a drop-down menu asking the reason you need a transcript. Select Federal Tax and leave the Customer File Number field empty. Click the Go button.
5. The following page will show a Return Transcript, Records of Account Transcript, Account Transcript and Wage & IncomeTranscript for the last four years. You'll want the 2020 Account Transcript.
6. This will open a PDF of your transcript: Focus on the Transactions section. What you're looking for is an entry listed as Refund issued, and it should have a date in late May or June.
If you don't have that, it likely means the IRS hasn't gotten to your return yet.
Most don't have to file an amended return
Most taxpayers don't need to file an amended return to claim the exemption. If the IRS determines you are owed a refund on the unemployment tax break, it will automatically correct your return and send a refund without any additional action from your end.
The only reason to file an amended return is if the calculations now make you eligible for additional federal credits and deductions not already included on your original tax return, like the Additional Child Tax Credit or the Earned Income Tax Credit. The IRS said it will be sending notices in November and December to people who didn't claim the Earned Income Tax Credit or the Additional Child Tax Credit but may now be eligible for them.
If you think you're now eligible for deductions or credits based on an adjustment, the most recent IRS release has a list of people who should file an amended return.
What to know about 971, 846, 776 and 290 transcript codes
Some taxpayers who've accessed their transcripts report seeing different tax codes, including 971 (when a notice was issued), 846 (the date and amount of a refund) and 776 (the amount of additional interest owed by the IRS). Others are seeing code 290 along with "Additional Tax Assessed" and a $0.00 amount. Since these codes could be issued in a variety of instances, including for stimulus checks and other tax refunds or adjustments, it's best to consult the IRS or a tax professional about your personalized transcript.
How to call the IRS if you're waiting on a refund
It's best to locate your tax transcript or try to track your refund using the Where's My Refund tool (mentioned above). The IRS says that you can expect a delay if you mailed a paper tax return or had to respond to the IRS about your electronically filed tax return. The IRS makes it clear not to file a second return.
The IRS says not to call the agency because it has limited live assistance. The agency is juggling the tax return backlog, delayed stimulus checks and child tax credit payments. Even though the chances of speaking with someone are slim, you can still try. Here's the best number to call: 1-800-829-1040.
What else to know about unemployment tax refunds
The IRS has provided some information on its website about taxes and unemployment compensation. But we're still unclear on the exact timeline for payments, which banks get direct deposits first or who to contact at the IRS if there's a problem with your refund.
Some states, but not all, are adopting the unemployment exemption for 2020 state income tax returns. Because some get full tax unemployment benefits and others don't, you might have to do some digging to see if the unemployment tax break will apply to your state income taxes. This chart by the tax preparation service H&R Block could give some clues, along with this state-by-state guide by Kiplinger.
Here is information about the child tax credit for up to $3,600 per child and details on who qualifies.