Millions of unemployment tax refunds coming: IRS timeline, tax transcripts and more

If you still haven’t received your IRS refund for the taxes you paid on last year’s unemployment benefits, check your bank account and your mailbox. The tax agency is sending another batch of refunds to nearly 4 million people. Direct deposit refunds went out on July 14, and paper checks started to go out before the weekend, according to the IRS. Leading up to this recent announcement by the IRS, taxpayers expressed angst over refund problems through online platforms — and many still feel in the dark. 

These refunds are part of the American Rescue Plan that made the first $10,200 of 2020 jobless benefits — or $20,400 for married couples filing jointly — nontaxable income. Roughly 13 million taxpayers could be eligible for the adjustment because they overpaid when they filed their taxes before the bill was passed. The refund average is $1,265, the IRS said, so you could get more or less, depending on your income and other factors. 

A bank transaction with the IRS TREAS 310 code could mean your tax return was adjusted and your refund deposited. If you’ve given up on calling the IRS, read on for how to access your tax transcript for clues about your status. For other unemployment news, you can see which states are ending the $300 weekly bonus payments. And if you’re a parent who got your first child tax credit payment this week, we can tell you how it could affect your taxes next year. We’ve updated this story.

What to know about IRS tax refunds on unemployment benefits

In late May, the IRS started sending refunds to taxpayers who received jobless benefits in 2020 and paid taxes on that money before the American Rescue Plan went into effect. That law waived taxes on up to $10,200 in unemployment insurance benefits for individuals earning less than $150,000 a year.

The first batch of these supplemental refunds went to those with the least complicated returns (single taxpayers with no dependents), and batches are supposed to continue throughout the summer for more complicated returns. According to an igotmyrefund.com forum and another discussion platform on Twitter, some taxpayers who filed as head of household or as married with dependents started receiving their IRS money in early July. Others seem to be getting updates on their transcript with dates of July 14 or July 26. 

On July 13, the IRS said it’s sending out 4 million more payments via direct deposit and paper check. 

Here’s a quick recap of what we know. 

• The tax break is only for those who earned less than $150,000 in adjusted gross income and for unemployment insurance received during the pandemic in 2020. 
• The $10,200 is the amount of income exclusion for single filers, not the amount of the refund. The amount of the refund will vary per person depending on overall income, tax bracket and how much earnings came from unemployment benefits.
• Most taxpayers don’t need to file an amended return to claim the exemption. But if you think you’re now eligible for deductions or credits based on an adjustment, check the recent IRS release for the list of who should file an amended return. 
• 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. 
• 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. 
• Refunds started going out in May and will go out in batches through the summer as the agency evaluates tax returns. More complicated returns could take longer to process.
• The IRS is doing the recalculations in phases, starting with single filers who are eligible for the up-to-$10,200 tax break. It will then adjust returns for those taxpayers who are married and filing jointly, who are eligible for the up-to-$20,400 tax break.
• Refunds 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 TREA 310 TAX REF.” Otherwise, the refund will be mailed as a paper check to the address the IRS has on hand.
• The IRS will send you a notice explaining the corrections within 30 days of when a correction is made.
• Some states, but not all, are also adopting the unemployment exemption for 2020 state income tax returns. 

How to get your tax transcript to check on your unemployment refund status 

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). Some states may issue separate forms depending on the jobless benefits — for example, if you received federal pandemic unemployment assistance, or PUA. 

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. The IRS says not to call the agency. 

You can try the IRS online tracker applications, aka the Where’s My Refund tool and the Amended Return Status tool, but they may not provide information on the status of your unemployment tax refund. 

One clear 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 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 into 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 & Income Transcript 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. 

What we’re still waiting to hear about unemployment refunds

The IRS has only provided limited information on its website about taxes and unemployment compensation. We’re still unclear of the exact timeline for payments (they’re a bit sporadic) or how to contact the IRS if there’s a problem with your tax break refund. 

Also, since some states fully 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’s how to track your tax return status and refund online and what we know about contacting the IRS for stimulus check problems. For more on stimulus payments and relief aid, here is information about the child tax credit for up to $3,600 per child and details on who qualifies.