The American Rescue Plan Act included a $ 10,200 tax break that people who collected unemployment benefits in 2020 can deduct from their AGI. Are you included in the 10 million taxpayers who will receive a refund?
New legislation signed by Biden on March 11, allowed taxpayers who earned less than $ 150,000 in modified adjusted gross income to exclude 2020 unemployment compensation up to $ 20,400 if married filing jointly and $ 10,200 for all other eligible taxpayers.
The first refunds resulting from the tax break included in the Biden Administration's "American Rescue Plan" began processing the week of May 10.
More than 10 million taxpayers who paid taxes on unemployment funds received in 2020, before the tax break was enacted, will be eligible for refunds, according to the IRS.
These people are among the 23 million Americans who filed for unemployment last year, according to the Bureau of Labor Statistics.
The tax exemption applies to Americans who earned less than $ 150,000 in modified adjusted gross income, who can exclude part of their unemployment compensation from their income, meaning they do not have to pay taxes on that amount.
In joint-filing cases, each spouse can exclude up to $ 10,200 for funds received for unemployment compensation, which could mean up to $ 20,400 per couple.
The office explained that the money disbursement process will be done in two phases. The first, which is already in progress, will focus on the single tax returns that are the easiest to examine. The second, which would run until the end of the summer, will focus on the more complex returns or marriages claiming dependents and tax credits.
Individuals, therefore, will be the first to receive the refund on any tax payments, followed by couples who filed jointly, and the repayments will come in phases, continuing through the summer.
Most people will not need to take action to get their refund.
People who collected over $ 10,200 in unemployment income in 2020, however, will still owe taxes on the amount over that threshold.
In cases where people provided their information for direct deposit, the money will reach their bank account that way. These people are likely to receive payments first since the electronic transfer process tends to expedite the disbursement of money.
In all other cases, the person will receive the payment as a check or debit card through the postal mail.