Here's What You Need to Remember: As many Americans have already filed their taxes prior to the American Rescue Plan being signed into law by President Joe Biden, the IRS announced that it would refund the overpaid taxes. If the IRS determines the taxpayer is owed a refund, then it will send a check automatically.

If a person has ever received unemployment benefits in the past after being laid off from a job, then they likely know that the money was typically just a percentage of their take-home pay and not always enough to make ends meet. Also, they may have gotten an unpleasant surprise when you discovered that not enough taxes were withheld.

The coronavirus changed unemployment and some would argue for the better while some would say for the worse. Unemployment benefits were meant to be a lifeline to help individuals receive a steady but small influx of cash while actively looking for work.

An estimated forty million Americans collected a combined $580 billion in unemployment insurance benefits last year, according to an April report from The Century Foundation. That included people who were laid off as well as so-called “gig workers,” contractors and self-employed individuals who don’t normally qualify for unemployment insurance.

Those people who were on unemployment benefits in 2020 could see a tax refund instead of owing money.

It was reported just this week that 7.3 million who received unemployment checks during the coronavirus pandemic could get refunds due to the $10,200 tax break that came about as part of the American Rescue Plan Act from March. Essentially it means that unemployment paid out last year does not count as earned income for the year, and individuals couldn’t be taxed on it, while married couples filing jointing were eligible for up to a $20,400 exclusion.

For those people who haven’t yet filed their taxes yet, that essentially means they don’t have to pay taxes on unemployment benefits up to that amount.

“If your modified adjusted gross income (AGI) is less than $150,000, the American Rescue Plan enacted on March 11, 2021, excludes from income up to $10,200 of unemployment compensation paid in 2020, which means you don’t have to pay tax on unemployment compensation of up to $10,200. If you are married, each spouse receiving unemployment compensation doesn’t have to pay tax on unemployment compensation of up to $10,200. Amounts over $10,200 for each individual are still taxable,” the Internal Revenue Service (IRS) explained on its website.

“This new clarification from the IRS is good news for the millions of taxpayers impacted, but may still be confusing,” Mark Steber, chief tax officer for Jackson Hewitt told Cnet.com. “Some taxpayers may have questions as to the timing of any payment and whether it will come in a check or other form.”

As many Americans have already filed their taxes prior to the American Rescue Plan being signed into law by President Joe Biden, the IRS announced that it would refund the overpaid taxes. If the IRS determines the taxpayer is owed a refund, then it will send a check automatically.

The refunds have begun to be sent out and will continue through the summer.

Peter Suciu is a Michigan-based writer who has contributed to more than four dozen magazines, newspapers and websites. He regularly writes about military small arms, and is the author of several books on military headgear including A Gallery of Military Headdress, which is available on Amazon.com. This article first appeared earlier this year.

Image: Reuters