In its regular email to tax professionals last week, the Internal Revenue Service remined them that their clients who filed 2020 returns before the American Rescue Plan Act (ARPA) excluded a portion of unemployment from tax don't need to file amended returns.
The IRS says it will recalculate the tax liability of these filers, taking into account the tax they paid on $10,200 per person in unemployment benefits before ARPA's March 11 enactment date.
If the early-filing taxpayers are due a refund, the IRS will automatically send them the amounts. The unemployment-related refunds are expected to start going out in May.
But in some cases, qualifying taxpayers might want to get proactive despite the IRS' pledge to take care of things.
That's the advice of some tax pros in Andrew Keshner's recent MarketWatch article, "Expecting another refund after the IRS calculates the $10,200 unemployment tax break? Why you might want to do more than just wait."
"Though the IRS said it would automatically adjust returns based on the exclusion, it said it would not tweak the returns to apply for new tax credits if the underlying return didn’t already seek those credits," writes Keshner in the piece, which get this weekend's Saturday Shout Out.
Claiming newly eligible credits: If your new lower income with the $10,200 excluded unemployment income means you're then eligible for other tax breaks, notable the Earned Income Tax Credit (EITC), then you will need to amend your 2020 filing.
Keshner also looks at other unemployment related amended return factors to consider, such as the cost of filing a 1040-X, as well as potential timing considerations.
If you're one of the folks who filed early and paid tax on all your 2020 unemployment benefits, check out the article. Even when you do get a revised tax bill or refund, it could be worthwhile to amend your 2020 return to get even more tax breaks.
And if you've yet to file, make sure that you don't miss any tax breaks available due to your new adjusted gross income without the added $10,200.
You also might find these items of interest:
- Unemployment helps after a job loss, but it's taxable income
- Unemployment tax troubles: wrong 1099-G amounts & benefits ID theft
- Lingering unemployment tax troubles: wrong amounts, wrong recipient ID info and no forms
Advertisements
