Unemployment benefits: will the IRS automatically refund the taxes to beneficiaries?
Some taxpayers who claimed unemployment benefits in 2020 filed their return before the $10,200 waiver on jobless aid was passed. What you need to know here.
Last year, over 23 million workers nationwide in the US made unemployment claims, including self-employed workers who qualified for unemployed benefits for the first time. This income needs to be reported on tax returns.
Democrats in Congress passed the American Rescue Plan in March which included $1,400 stimulus checks and a slew of enhanced tax provisions to help struggling Americans. Included in those provisions was a waiver on up to $10,200 of unemployment compensation. However, President Joe Biden’s $1.9 trillion covid-19 relief bill was enacted in the middle of the 2021 tax season, which meant that the Internal Revenue Service (IRS) had to incorporate new provisions and send out the third round of Economic Impact Payments while processing 2020 tax returns on top of a backlog from 2019.
What do taxpayers who reported unemployment compensation need to do?
Taxpayers that had already reported their unemployment benefits on their 2020 returns were left wondering what actions they needed to take. The IRS issued a statement saying that the agency will go back and reprocess and retroactively apply the waiver to those returns that it has already issued a refund for. The first refunds for those filers are expected to be made in May and will continue into the summer.
“For those taxpayers who already have filed and figured their tax based on the full amount of unemployment compensation, the IRS will determine the correct taxable amount of unemployment compensation and tax. Any resulting overpayment of tax will be either refunded or applied to other outstanding taxes owed,” the statement reads.
“There is no need for taxpayers to file an amended return unless the calculations make the taxpayer newly eligible for additional federal credits and deductions not already included on the original tax return,” the IRS wrote.
The American Rescue Plan allows taxpayers who earned less than $150,000 in modified adjusted gross income to exclude $10,200 of unemployment compensation in 2020 from taxes. #IRS will take steps to automatically refund money this spring and summer. https://t.co/pglPeUWwVu pic.twitter.com/4kcDqNnll8— IRSnews (@IRSnews) April 5, 2021
How does the $10,200 tax break on unemployment benefits work?
The tax waiver is only applicable to unemployment compensation received in 2020. It allows taxpayers to exclude up to $10,200 per person of unemployment benefits received. Individuals and married couples filing jointly who have a modified adjusted gross income (AGI) of less than $150,0000 can claim the waiver. Fortunately, the IRS recently updated its guidance allowing workers to exclude unemployment compensation from AGI calculations.
What additional tax credits could I get if I amend my return?
Certain tax provisions can only be claimed based on a filers AGI along with other requirements. One in particular tax credit the IRS specifies is the Earned Income Tax Credit (EITC). Taxpayers who claimed the EITC will have their returns automatically adjusted, but the agency recommends filing an amended tax return for those who did not originally claim the EITC or other credits but now are eligible because the exclusion changed their income. The IRS also recommends that those taxpayers review their state tax return.
The earned income tax credit is meant to reduce the amount that low- and moderate-income Americans have to pay in taxes — and it can sometimes result in a refund. Figuring out whether you qualify can be confusing. This guide can help. https://t.co/XUBEjQjvrT— ProPublica (@propublica) April 3, 2021
To check your eligibility for the Earned Income Tax Credit you can use the IRS EITC Assistant online tool.
Te recomendamos en English
- US NEWS Fourth stimulus check live updates: child tax credit date, plus up payments in third check, how to claim
- US NEWS Covid vaccine in the US live updates today: J&J vaccine recall, blood clots, Fauci statements, My Turn...
- ROYAL FAMILY Prince Philip Funeral: what happened at the Duke of Edinburgh's Windsor ceremony?
- CORONAVIRUS STIMULUS CHECK $600 Golden State Stimulus check: when are they being sent?
- CORONAVIRUS STIMULUS CHECK Third stimulus check for veterans: how to track and claim a missing payment
- MLS Carlos Vela gets mad at Bob Bradley for taking him off too early