If you received unemployment compensation in 2020 then you may qualify for a tax refund.
The IRS is reviewing the tax returns filed before the American Rescue Plan became law in March of this year to determine the taxable amount of unemployment compensation.
The American Rescue Plan excluded up to $10,200 in unemployment compensation per tax payer from taxable income paid in 2020. Please note that this is only the limit of taxable unemployment compensation, not the refund you would receive.
This adjustment is important, because a record number of Americans applied for unemployment benefits in 2020 due to the coronavirus pandemic.
Depending on their individual situation, some taxpayers will receive refunds, while others will have the exceeding amount applied to taxes due or other debt. For some taxpayers there will be no change.
Taxpayers may also have their return corrected for other credits that were also affected by the American Rescue Plan: the earned income tax credit, the premium tax credit, and the recovery rebate credit.
You don’t have to take any action to benefit from these adjustments. The IRS will review your return to calculate the correct taxable amount.
If the IRS adjusts your tax return, you will receive a letter from them within about 30 days. The letter will detail what adjustments were made to your return as well as the amount of the adjustment.
And by the way, here’s an extra tip to keep in mind: don’t forget to keep for your records any letter from the IRS.
Contact the Experts at JT Tax Services
Do you need help preparing your taxes? Do you want to learn more about refunds and credits? At JT Tax Services, we give you the peace of mind that comes with knowing that you are limiting your liability while staying compliant with all regulations.
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