The American Rescue Plan Act included a $ 10,200 tax break that people who collected unemployment benefits in 2020 can deduct from their AGI. When will the IRS refund money to those who filed their taxes before it was enacted?
New legislation signed by Biden on March 11, includes a $1,200 tax break that allows 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. How will the agency give back the money that has already been paid?
The IRS announced that it will take steps to automatically refund money this spring and summer to people who filed their tax return reporting unemployment compensation before the recent changes made by the American Rescue Plan.
As the change occurred after some people filed their taxes, the IRS will take steps in the next months to make the appropriate change to their return.
Because of this, if you collected unemployment benefits last year, you could receive a larger tax refund this year.
Starting in May, the IRS will send refunds to taxpayers who filed their 2020 tax returns without claiming a new tax break on unemployment benefits.
For those taxpayers who have already filed their taxes based on the total amount of unemployment compensation, the IRS will determine the correct taxable amount of unemployment compensation and taxes and refund the difference.
Therefore, for anyone who has overpaid taxes (for not taking the exemption into account), the money will be refunded or their payment will be applied to other taxes that they owe to the IRS.
The first repayments are expected to take place in May and continue through the summer.