Have You Received Your Unemployment Tax Refund From The IRS? – Forbes Advisor - Forbes

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Updated: Nov 2, 2021, 1:56pm
On Nov. 1, the IRS announced it had sent about 430,000 tax refunds to taxpayers who overpaid taxes on their unemployment in 2020. If you claim unemployment and qualify for the adjustment, you don’t need to take any action. You’ll receive your refund by direct deposit if the IRS has your banking information on file, and a paper check if not.
These taxpayers are getting a refund because they had already reported their unemployment compensation on their 2020 tax returns before the American Rescue Plan (ARP) was signed into law. ARP provided a tax break of up to $10,200 to those who received unemployment compensation in 2020.
To date, the IRS has identified more than 16 million taxpayers who are eligible and has issued more than 11.7 million unemployment tax refunds, totaling $14.4 billion. Although the IRS started processing the unemployment tax refunds in May, it started with the simplest tax returns and is now processing the remaining tax returns. The IRS will continue to process these tax returns before the end of the year.
The IRS plans to continue to send more refunds to qualifying taxpayers through the end of 2021. Here is what you need to know.

You may qualify for the tax break up to $10,200 of unemployment compensation if your modified adjusted gross income (MAGI) is less than $150,000 for 2020. If you’re married, each qualifying spouse may exclude up to $10,200.
If your MAGI exceeds the income threshold, you won’t qualify for the tax exclusion and will need to pay taxes on any unemployment compensation you receive. Also, if you file Form 1040-NR, you can’t claim the unemployment tax break for your spouse.
If you have yet to file your 2020 tax return, you can claim the tax break up to $10,200 from your taxable income.
The IRS will automatically adjust your tax return if you qualify for the unemployment tax break, which may affect your eligibility for the Earned Income Tax Credit, Additional Child Tax Credit, American Opportunity Tax Credit, Premium Tax Credit and the Recovery Rebate Credit on your tax return.
If you didn’t claim the Earned Income Tax Credit or the Additional Child Tax Credit, but may now be eligible for them, the IRS will send notices by mail requesting additional information to determine if you qualify. Once they receive your response, the IRS will make the necessary adjustments to your tax return, although they haven’t yet disclosed how they’ll send refunds if applicable.
However, if you now qualify for other tax benefits, such as the tuition and fees deduction and the student loan interest deduction, you’ll need to file a Form 1040-X, Amended U.S. Individual Income Tax Return to claim them. Use the IRS’ interactive interviews to determine if you qualify for any additional tax breaks, or speak with a tax professional.
Kemberley (@kemcents) Washington, CPA, is a former IRS agent, news contributor, author, and owner of Washington CPA Services, LLC. Check out more of her work at kemberley.com.

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