The IRS has started to send out over 2 million refunds this week to taxpayers who paid taxes on unemployment compensation prior to the passage of the American Rescue Plan Act of 2021 (ARPA). In March of this year, Congress passed that ARPA which among other items had a provision that excluded the first $10,200 in unemployment compensation from taxes if your Adjusted Gross Income was under $150,000. However millions of individuals had already filed their tax returns and reported the fully amount of their unemployment on their tax returns. Instead of having these individuals file an amended tax return, the IRS began a programming review of the tax returns to identify the excludible unemployment compensation.

The IRS has so far reviewed over 3.1 million tax returns and has issued additional refunds to 2.8 million individuals as a result of this review process. During the summer of 2021, the IRS will continue with this review process to determine the additional individuals who may be eligible for a refund. After sending out these refund checks, the IRS will mail out letters within 30 days to inform the individuals of the adjustments that were made.