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$14.8 Billion in Refunds: IRS Hands Out Payments to Over 12 Million Americans for Overpaid Pandemic Unemployment Taxes

The Internal Revenue Service (IRS) has issued refunds to over 12 million Americans who paid too much in taxes on unemployment benefits they received during the first year of the pandemic. Based on a report by Yahoo Finance on January 10, 2023, the agency corrected 14 million 2020 tax returns related to unemployment compensation, leading to a total of $14.8 billion in refunds with an average refund of $1,232 per person.

The tax probe was a result of the American Rescue Plan’s exclusion of up to $10,200 in unemployment aid from being taxed in 2020, causing some taxpayers to receive refunds, others to have overpayments applied to taxes due or other debts, and some to have a reduction in their adjusted gross income due to the plan going into effect after some taxpayers had already filed their tax returns for 2020.

Based on a report by Accounting Today on January 6, 2023 or 2024, individuals and married couples who earned less than $150,000 were eligible for the unemployment exclusion. An estimated 40 million Americans received unemployment benefits. The IRS also made changes to credits such as EITC, RRC, ACTC, PTC, and ATC.

If you qualify for the unemployment compensation exclusion, file an amended 2020 tax return to claim any refunds or credits due. According to Yahoo Finance, there is currently a backlog of returns at the IRS, and it may be difficult to contact them, but they will fix any issues in due time. This highlights the underfunding of the IRS and the need for a safety net.

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