IRS to recalculate taxes on unemployment benefits

  
The IRS has announced that it will automatically refund money to taxpayers who reported unemployment compensation in their tax return before the recent changes made by the American Rescue Plan signed on March 11, 2021. 

The American Rescue Plan allows taxpayers earning less than $150,000 in modified adjusted gross income to exclude unemployment compensation up to $20,400 if married filing jointly and $10,200 for other taxpayers. The legislation only applies to 2020 unemployment benefits. 

The news release clarifies that those who filed before the legislation was signed will have the appropriate changes made to their returns, which may result in a refund. For taxpayers who have already filed, the IRS will recalculate the correct taxable amount of unemployment compensation and tax. Any tax that has been overpaid will be refunded or applied to outstanding taxes owed. Taxpayers can expect refunds to be issued in May and continue into the summer months.

"For those who have already filed, the IRS will do these recalculations in two phases, starting with those taxpayers eligible for the up to $10,200 exclusion. The IRS will then adjust returns for those married filing jointly taxpayers who are eligible for the up to $20,400 exclusion and others with more complex returns."

See New Exclusion of up to $10,200 of Unemployment Compensation for more information.
0 comments
58 views