IRS now sending $10,200 refund to millions who paid unemployment taxes. Will you get the tax break? - CNET

The IRS is now refunding thousands of dollars to those who paid taxes on unemployment benefits.

Sarah Tew/CNET

If you paid taxes this year on unemployment benefits you received in 2020, you may be owed a refund. The IRS is now returning money to nearly 10 million people who filed their tax return before the $10,200 tax break that is included in the American Rescue Plan Act became law. With the new rules, unemployment benefit money isn't considered earned income during the pandemic, so you can't be taxed on the money you received in 2020.

The IRS last week began sending the first of the tax-break refunds to those who are eligible. The agency said it'll continue to refund the money through the summer as it processes tax returns and reviews taxes paid on unemployment benefits. The March stimulus bill also extends the weekly $300 bonus unemployment payments, authorizes a third stimulus check (and "plus-up" payments) and boosts the child tax credit to as much as $3,600 per kid.

Twenty-three million Americans filed for unemployment last year, according to the Bureau of Labor Statistics. Under Pandemic Unemployment Assistance, this included people who were laid off as well as gig workers, contractors and self-employed people who don't normally qualify for unemployment insurance. We'll explain the unemployment tax refund, and the details we're still waiting to learn. Here's when you can expect to receive your first child tax credit payment and how you much you may get when the payments start in July. This story has been recently updated with new information.

IRS unemployment tax refund: 6 key things to know now

With unemployment refunds up to $10,200 now going out to taxpayers who paid taxes when they filed, here's what you can expect.

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Unemployment tax refund info we're still waiting to hear about

There is still something we don't know about the refunds. We've contacted the IRS for clarification:

• How to contact the IRS if there's a problem with your tax-break refund. (Here's what we know about contacting the IRS about stimulus check problems.)

"This new clarification from the IRS is good news for the millions of taxpayers impacted, but may still be confusing," said Mark Steber, chief tax officer for Jackson Hewitt. Steber suggested checking with a tax professional once you receive your automatic refund to make sure the IRS sent the right amount.

For more details, here everything about the child tax credit for up to $3,600 per child and who qualifies for the child credit.

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