How and who has to file an Amended Return to get the $10,200 IRS unemployment tax break?

Anyone who received jobless benefits during 2020 may now be eligible for the earned income tax credit and other federal programmes. Here's everything you need to claim the support.

How and who has to file an Amended Return to get the $10,200 IRS unemployment tax break?

As the IRS continues to oversee the 2021 tax season the tax authority is automatically recalculating and refunding money to some early filers who did not take advantage of the new $10,200 unemployment tax break.

The new tax-free provision was included in the American Rescue Plan, which was signed into law last month. But the help does not end there and some will find that this reduction to taxable income could have a knock-on effect for other tax credits with more benefits potentially available.

But to make the most of other programmes you may have to file an Amended Tax Return to make the most of the support. Here’s everything you need to know to get your full entitlement.

Unemployment tax break could make you eligible for other federal programmes

The new tax break is essentially a waiver on the first $10,200 of federal unemployment benefits each recipient received during 2020. Usually claimants would have to pay tax on this benefit. The waiver is only applicable to jobless support received last year but because the stimulus package was not signed until mid-March, many had already completed their 2020 tax returns.

The $10,200 deduction will mean that the claimant's total taxable income will fall accordingly, meaning that they could now be eligible to receive additional tax breaks like the Earned Income Tax Credit (EITC). However to do so they will need to file an Amended Tax Return

"Taxpayers would have to file an amended return if they did not originally claim the EITC or other credits but now are eligible because the exclusion changed their income," say the IRS. "These taxpayers may want to review their state tax returns as well."

For more details on eligibility for the EITC to see if you need to file an Amended Tax Return, check out this guide to the Earned Income Tax Credit.

How to file an Amended Tax Return

You are not legally required to file an Amended Tax Return because technically your tax returns were correct at the time of filing, but you could be missing out on further support if you don’t. Once submitted the IRS is expected to begin issuing refunds for any additional tax credits from May onwards, once the current tax season finishes

Crucially there is no rush to get a new filing submitted as the IRS allow three years from this year’s tax deadline to get the Amended Tax Return in. This means you have until 17 May 2024 to file your amended returns and begin receiving any extra entitlements.

To do so you can submit Form 1040-X, Amended U.S Individual Income Tax Return electronically on the IRS online portal.

There is also the option to submit a paper version of the Form 1040-X with full information on the filing process to be found on Instructions for Form 1040-X, along with the address to mail your amended return.