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IRS to send refunds to 7.3 million who got unemployment checks. Could you get a $10,200 tax break?

If you paid taxes on unemployment benefits you received in 2020, the IRS may owe you a tax refund. We'll explain why.

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The IRS is automatically refunded thousands of dollars paid on unemployment checks in 2020. Here's what to know

The IRS is automatically refunding thousands of dollars paid on unemployment checks in 2020. Here's what to know.

Sarah Tew/CNET

If you received unemployment benefits in 2020 and paid taxes on the money this year when you filed your income tax return, the IRS could automatically refund all or part of what you paid. The American Rescue Plan Act passed in March included a $10,200 tax break so that unemployment checks you received during the pandemic do not count as earned income for the year. You also can't be taxed on the money. If you already paid taxes on the unemployment money, the IRS said it will automatically refund the amount for qualified people.

This month, the first refunds are expected to arrive for around 7.3 million people, according to a report from the Treasury Department. Refunds will continue to be sent during the summer, as the IRS processes tax returns. In addition to this unemployment tax break, the March stimulus bill also extends the weekly bonus $300 unemployment payments, authorizes a third stimulus check (what to know about "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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Unemployment tax refund information we're waiting to hear about

"This new clarification from the IRS is good news for the millions of taxpayers impacted, but may still be confusing," said Mark Steber, chief tax officer for Jackson Hewitt. "Some taxpayers may have questions as to the timing of any payment and whether it will come in a check or other form." 

Steber also suggested checking in with a tax professional once you receive your automatic refund to make sure the IRS sent the right amount.

For more details, here are seven ways to get money back on your 2020 tax return, everything about the child tax credit for up to $3,600 per child and what to know about the May 17 tax deadline.

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