The agency said Tuesday that it’s processing returns for 4 million people who paid taxes on jobless aid before mid-March, when Democrats passed a stimulus bill that included a tax break for out-of-work Americans.
The law waives taxes on up to $10,200 in 2020 unemployment insurance benefits for individuals who earn less than $150,000 a year. The IRS has estimated that up to 13 million Americans may qualify for the tax break.
Refunds are expected to land in Americans’ bank accounts on Wednesday, while paper checks could arrive as soon as Friday. The average refund is worth about $1,265.
The agency – which already delivered refunds in May and June – previously said it will do the recalculation in two phases, beginning with taxpayers who are eligible for the $10,200 exclusion. It will then proceed to calculate the new refund for married couples who are eligible for the $20,400 exclusion and other more complex returns.
“There is no need for taxpayers to file an amended return unless the calculations make the taxpayer newly eligible for additional federal credits and deductions not already included on the original tax return,” the agency said.
The IRS has cautioned that the refund is is “subject to normal offset rules,” the IRS said, meaning that it can be used to cover “past-due federal tax, state income tax, state unemployment compensation debts, child support, spousal support or certain federal nontax debts (i.e., student loans).”