When to Expect a US $ 10,200 Unemployment Tax Credit Refund
If you claimed unemployment last year but filed your taxes before a new $ 10,200 unemployment tax break was announced, the IRS says you can expect an automatic refund starting in May if you are eligible. The tax waiver has led to some confusion as it was announced midway through the tax season, prompting the IRS to offer additional instructions on how to request it, even if you filed your 2020 tax return before the provision went into effect.
How does the tax credit work
Under the COVID law, federal taxes for individuals can be waived up to $ 10,200 in unemployment income for the 2020 tax year, provided you earned $ 150,000 or less – this is a minimum threshold without any restrictions. discontinue gradually. Ironically, the $ 150,000 income threshold remains unchanged for joint applicants, although they each qualify for tax credits, which would then amount to $ 20,400 ( on CNBC : if you and your spouse earned more than $ 150,000 in 2020, you might want to file separately so both of you can request a waiver.)
Since unemployment benefits are generally considered taxable income, the IRS also clarified that they will not count unemployment income when calculating this tax credit. (This means that if you earned $ 140,000 but received $ 10,001 in unemployment, you would still be eligible for the tax credit, whereas you would not have been if unemployment income had been counted towards the total.)
How to get benefits
According to CNBC , those who have not yet applied or have applied after the new law took effect should automatically account for the tax waiver in their returns (tax software companies such as TurboTax and H&R Block have also updated their software by including the tax credit). The IRS advises that any tax overpayment will either be refunded or applied to other taxes owed.
As such, the IRS advises that people who filed ahead of time do not need to file an amended return, unless the new taxable income exemptions would make the taxpayer new eligibility for additional federal credits and deductions that were not already included in the original tax return (Adjusted Income Calculation may qualify. you, for example, for the Earned Income Tax Credit).
Note that this tax credit only applies to federal taxes, and that some states will still tax your unemployment income, although some do not (you can check your state’s policies here ).
When to expect a refund (if you qualify)
If you are eligible for a waiver, and that entitles you to a refund, the IRS advises that you can expect to receive a check in May – although more complex or jointly filed tax returns will be processed later in the summer (they do not, unfortunately, more specifically) …
This story was originally published on March 24, 2021 and was updated on April 12, 2021 with updated information on when refund checks will be issued.