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IRS sending out another 1.5 million tax refunds to people who overpaid on unemployment benefits

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The government is issuing another batch of refunds this week to taxpayers who received jobless aid last year and overpaid on taxes, the Internal Revenue Service announced.

The agency said it is issuing 1.5 million tax refunds to Americans this week, with the typical refund around $1,600. The IRS said direct-deposit payments went out starting July 28 and paper checks started hitting mailboxes July 30.

This is the fourth round of refunds related to unemployment aid that the IRS has issued since Congress changed the tax law this spring to allow formerly unemployed people to keep more of their benefits. The IRS sent out three previous rounds of payments in May, June and earlier this month.

Normally, unemployment benefits are subject to federal income tax. However, the American Rescue Plan, passed in March, decreed that up to $10,200 in jobless benefits would not be taxable. The change, passed after millions of jobless aid recipients already filed tax returns, meant that many were due refunds.

The IRS previously said as many as 13 million people might be eligible for refunds. Since May, the agency has given back $10 billion to 8.7 million taxpayers, it said. The IRS plans to continue reviewing and adjusting tax returns over the summer.

How do you get a refund?

Most taxpayers who may have overpaid their taxes don't need to do anything to collect a refund, according to the IRS. The agency said it is proactively adjusting taxpayers' refunds and sending back money.

However, one group of people may need to file an amended tax return to get all the money they're due. If a taxpayer has a dependent, and if excluding the unemployment benefits from last year's total income puts the income below the cutoffs for the Earned Income Tax Credit, then they will need to file an amended return to claim that tax credit, the IRS said. 

That doesn't apply to single taxpayers who become eligible for the EITC — the IRS will adjust their returns automatically, the agency said.

The maximum income to claim the EITC is about $41,000 for a single parent of one child and $47,000 for a married couple. The limits increase with more children.

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