Tax Refunds on 2020 Unemployment Benefits Due to Begin This Month
If you’re due a refund from the IRS for receiving 2020 unemployment benefits when they were still taxable, your money could arrive soon.
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Refunds on 2020 unemployment benefits are scheduled to start this month, CNBC reported on Monday. Single filers should be the first to receive them, while married couples and those with complicated returns will probably have to wait until summer.
Unemployment benefits are typically treated as taxable income on your federal tax return. But the $1.9 trillion American Rescue Plan, which President Joe Biden signed into law in mid-March, waived federal tax on up to $10,200 of unemployment benefits per person.
The problem is, many Americans who were eligible for the tax break had already filed their tax returns by the time Biden signed the bill and might have overpaid their taxes as a result.
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In late March, the IRS issued an announcement saying it would automatically refund the money in two phases — one during the spring and the other during the summer — to taxpayers who filed returns reporting unemployment compensation before the American Rescue Plan changes went into effect.
A lot of taxpayers are likely due a refund. CNBC, citing data from The Century Foundation, noted that around 40 million Americans received jobless benefits last year, with the average person getting $14,000.
The first phase of refunds will go to taxpayers who are eligible to exclude up to $10,200 of unemployment benefits from their federal taxable income. The second phase includes married couples who filed a joint tax return. These couples can waive taxes on up to $20,400 of benefits. The second phase also includes “others with more complex returns,” the IRS said.
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According to a separate IRS announcement, you can’t exclude unemployment compensation from taxation if your modified adjusted gross income is $150,000 or more. Also, if you file Form 1040-NR, you can’t exclude any unemployment compensation for your spouse.
You might need to file an amended tax return using Form 1040-X to get your full refund if the unemployment tax break makes you newly eligible for a tax deduction or credit such as the earned income tax credit.
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This article originally appeared on GOBankingRates.com: Tax Refunds on 2020 Unemployment Benefits Due to Begin This Month
