IRS unemployment refund update: Timeline for the next batch is unclear as millions wait for payments

Millions of Americans who overpaid taxes on 2020 unemployment compensation are still waiting for refund checks from the Internal Revenue Service, but they may have to hang tight a little longer.

The IRS said last week that it had sent out 4 million checks, mostly by direct deposit, but it has not yet announced a timeline for the next batch of payments. Many recipients of last week’s batch said they had a deposit date of July 14. The IRS has only said that payments will continue “throughout the summer” as it works to correct millions of tax returns that needed to be adjusted after the passage of the American Rescue Plan Act.

Reached for comment, an IRS spokesperson had no new information about the next batch of refunds.

It’s not surprising that the agency is reluctant to offer a clearer timeline. In the past, it has wildly underestimated how long it would take to calculate and distribute these payments. When it first announced them, it said taxpayers should expect them in May, but most didn’t receive them until June. Similarly, the IRS said the second batch would go out in “mid-June,” but that didn’t go as planned either.

Much of the delay is likely due to the fact that the IRS is understaffed, underfunded, and juggling multiple levels of bureaucratic hell this year. In addition to unemployment-related refunds, it’s facing a backlog of returns and it’s tasked with distributing advance payments for the child tax credit. To top it off, it still hasn’t finished issuing all of the stimulus checks.

The unemployment refunds are being issued to people who filed taxes before changes to the law—enacted in March—that excluded up to $10,200 in unemployment compensation. Because of those changes, many people overpaid. The IRS said it identified 13 million returns that may need to be corrected, although not all of them will result in refunds.

In addition to the 4 million refunds it sent out last week, the IRS sent 2.8 million with the first batch of refunds in early June. The average size of the checks so far has been $1,265. It’s unclear how many refunds have yet to be distributed, but it’s likely in the millions.