“While many states will follow suit and automatically refund taxpayers, there are a handful of states that are requiring taxpayers to file an amended tax return to receive the benefit of the unemployment tax break if they filed before the American Rescue Plan was signed,” says Curtis Campbell, president of TaxAct, a tax preparation software. Otherwise, the IRS said it will recalculate returns of taxpayers by incorporating the $10,200 exclusion and either refund them or apply it to other taxes they owe. That means some taxpayers may have to file an amended return to get their maximum refund if the unemployment tax break now makes them eligible for additional tax credits that were not claimed on their original return, or if they mistakenly excluded their unemployment income in states that choose to still tax the jobless aid.
Some states may still opt to tax jobless aid, tax experts say. Here's what you need to know: Why must some amend their returns?īeginning in May and continuing into the summer, the IRS will automatically refund taxpayers who filed their returns without claiming the new tax break on unemployment benefits, it said, but this was in regards to their federal return. The legislation excludes only 2020 unemployment benefits from taxes. The legislation allows taxpayers who earned less than $150,000 in adjusted gross income to exclude unemployment compensation up to $20,400 if married filing jointly or $10,200 for all other eligible taxpayers. Until now, jobless insurance had to be reported as taxable income and many would likely owe federal income taxes on those benefits. IRS tax deadline: Retirement and health contributions extended to May 17, but estimated payments still due April 15 When will 'plus-up' payments arrive?: Catch-up COVID payments sent to 700,000 Americans in latest batch The latest $1.9 trillion stimulus package created a new tax break for tens of millions of workers who received unemployment benefits last year after businesses were forced to close and lay them off during the coronavirus pandemic. This applies to taxpayers who filed their federal and state tax returns before the American Rescue Plan became law in March. Taxpayers won’t have to file an amended federal return unless the unemployment tax break now makes them eligible for tax benefits like the Earned Income Tax Credit, a refundable tax credit for low- to moderate-income working individuals and couples, particularly those with children.
WHEN TO EXPECT UNEMPLOYMENT TAX BREAK REFUND FULL
Some Americans who received a federal tax break on their unemployment insurance last year may have to file an amended return to get their full refund.
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