A recent law change now allows some recipients to not pay tax on some 2020 unemployment compensation. The IRS announced that it will automatically refund money to eligible people who filed their tax returns before the recent change. Those refunds can be expected to begin in May and into the summer.
According to the IRS, the new law allows taxpayers who earned less than $150,000 in modified adjusted gross income to exclude some unemployment compensation from their income. This applies to individuals who pay self-employment tax as well, meaning they will not have to pay tax on some of it. People who are married filing jointly can exclude up to $20,400, with up to $10,200 for each spouse who received unemployment compensation. Other eligible taxpayers can exclude up to $10,200. Taxpayers who already filed their tax return only need to file an amended return if the recalculation make them eligible for additional tax credits or deduction not already included on their original return.
Get help with your 2020 taxes by contacting Lakeesha Browne, CPA.
“IRS will recalculate taxes on 2020 unemployment benefits and start issuing refunds in May.”, IRS, 8 Apr. 2021, https://www.irs.gov/newsroom/irs-will-recalculate-taxes-on-2020-unemployment-benefits-and-start-issuing-refunds-in-may, Accessed 8 Apr. 2021.