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IRS unemployment tax refund: Taxpayers frustrated by tracking issues, slow pace of payments

Many taxpayers who overpaid on unemployment compensation in 2020 are now eagerly waiting for refund payments.

IRS unemployment tax refund: Taxpayers frustrated by tracking issues, slow pace of payments
[Photo: Emil Kalibradov/Unsplash]
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Leave it to the Internal Revenue Service (IRS) to disappoint people twice in the same tax season.

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After waiting longer than usual to receive their refunds this year, many Americans who overpaid taxes on unemployment compensation in 2020 are now eagerly waiting for a second refund that the IRS said would begin to go out this month. With the month more than half over, the IRS is providing few updates.

Due to the American Rescue Plan Act, up to $10,200 is now excluded as taxable unemployment income for 2020, but because the law wasn’t passed until March 2021, many Americans who filed their taxes early may have overpaid. The IRS has said it will automatically correct these returns and that taxpayers who are due a refund, for the most part, do not need to file amended returns.

In an update on May 14, the IRS said those refunds would begin to be distributed “this week” and continue throughout the summer. Ten days later, however, many on social media are wondering if any of these checks have actually been delivered.

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Reached for comment, a spokesperson for the IRS told Fast Company that distribution of the payments began last week and that “some taxpayers have received the refunds.” The spokesperson had no immediate details on how many checks have gone out, but reiterated that payments would be made throughout the summer. 

The IRS, which is significantly understaffed and underfunded, has been criticized by the National Taxpayer Advocate for its lack of communications regarding refund timelines, and the vague manner in which it has rolled out the unemployment tax refunds is likely to add to that criticism.

One issue seems to be the lack of an adequate tracking system for the payments, with users on social media complaining that the “Where’s My Refund?” tool is not providing them with the proper updates. The IRS did not respond to a followup question about whether it offers a way for taxpayers to track these refunds. In its update earlier this month, it merely said it would send out a notice to taxpayers informing them of their corrected returns within 30 days.

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One banking official who spoke with Fast Company on the condition of anonymity said banks were unable to determine if the unemployment tax refunds were being delivered because the transactions would be difficult to distinguish from traditional tax refunds, which are also currently being distributed.

Sadly, if you’re eligible for one of these refunds, there doesn’t seem to be a whole lot you can do besides keep checking your bank account and wait for additional details. We’ll post an update when we know more.

About the author

Christopher Zara is a senior staff news editor for Fast Company and obsessed with media, technology, business, culture, and theater. Before coming to FastCo News, he was a deputy editor at International Business Times, a theater critic for Newsweek, and managing editor of Show Business magazine

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