The Internal Revenue Service recently announced that it will automatically adjust tax returns and refund issues for taxpayers who filed their taxes before unemployment benefit tax benefits kicked in last March. Payments will begin going out to over 5.4 million eligible taxpayers in May. If you filed your return without claiming a new break on unemployment benefits, here’s what you need to know.
A Breakdown of Unemployment Tax Breaks
In 2020, 40 million Americans received unemployment benefits after losing their jobs due to the COVID-19 pandemic. Since many Americans filed their taxes without claiming a new break on unemployment benefits, they were worried about being left with a surprise tax bill. Until the pandemic, these tax benefits had to be reported as taxable income.
To provide relief during the tax season, President Joe Biden signed a historic $1.9 trillion relief bill that created a new tax break for tens of millions of workers who received unemployment benefits in 2020 after losing their jobs due to the coronavirus pandemic.
The bill 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. The legislation excludes only 2020 unemployment benefits from taxes.
Should I File an Amended Return if I’m Eligible?
The IRS recently confirmed they aren’t requiring those who are eligible to file returns to get their money.
“Because the change occurred after some people filed their taxes, the IRS will take steps in the spring and summer to make the appropriate change to their return, which may result in a refund,” the agency said. “The first refunds are expected to be made in May and will continue into the summer.”
However, taxpayers will have to file an amended tax return if the recalculations make them newly eligible for additional federal tax credits or deductions not already claimed on their initial tax return.
Let Us Tax Shield Help You Receive Your Tax Breaks During the Coronavirus Pandemic
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Navigating the IRS or State taxing authorities isn’t easy to do on your own, especially during an unprecedented tax season. Fortunately, our tax professionals can help you navigate your options. Contact US Tax Shield today at (877) 829-3535 for your free, no-obligation consultation.
