Millions of Americans who got unemployment benefits could be getting some extra money.
Did you receive unemployment benefits during the pandemic last year and claim that money as income on your taxes? Based on new rules under the American Rescue Plan, workers who received jobless benefits in 2020 can’t be taxed on that money (up to $10,200 for single filers) like they have been in previous years. Since the new law came into effect after millions had already filed their income tax returns, those taxpayers are now eligible for an IRS tax refund.
Those refunds started going out this month and will continue through the summer as the IRS processes tax returns and reviews taxes paid on unemployment insurance. The agency said refund amounts will vary and not every adjustment will result in a refund. We’ll explain the unemployment tax exemption here and tell you what we still don’t know.
You may have also heard about states opting out of $300 bonus unemployment payments and other jobless benefits programs. If you’re wondering about other money you might be entitled to receive, here are some details about the enhanced child tax credit, how much you could get and information about the upcoming IRS child tax credit portals. This story has been updated.
What is the unemployment tax refund? 9 things to know
The IRS started disbursing unemployment refunds to taxpayers who treated their benefit payments as income and were taxed on it when they filed their return this year. Here’s what you can expect.
- The tax break is for those who earned less than $150,000 in adjusted gross income.
- Refunds started going out the week of May 10 and will run through the summer, as the IRS evaluates tax returns. More complicated returns could take longer to process.
- If the IRS determines you are owed a refund on the unemployment tax break, it will automatically send a check.
- You do not need to file an amended return to claim the exemption. (Here’s how to track your tax return status and refund online.)
- Refunds will go out as a direct deposit if you provided bank account information on your 2020 tax return. Otherwise, the refund will be mailed as a paper check to the address the IRS has on hand.
- The IRS is doing the recalculations in two phases, starting with those who are eligible for the up to $10,200 tax break. It will then adjust returns for those married-filing-jointly taxpayers who are eligible for the up to $20,400 tax break.
- The IRS will send you a notice explaining the corrections within 30 days of when a correction is made.
- You won’t be able to track the progress of your refund through the IRS Get My Payment tracker, the Where’s My Refund tool, the Amended Return Status tool or another IRS portal.
- The IRS can seize the refund to cover a past-due debt, such as unpaid federal or state taxes and child support.
Your tax questions answered in 3 minutes
What we still don’t know about the unemployment tax refund
The IRS has provided some information on its website about taxes and unemployment compensation. We are still unclear as to how to contact the IRS if there’s a problem with your tax-break refund. (Here’s what we know about contacting the IRS about stimulus check problems.) We’ve reached out to the IRS for clarification.
For more, here’s everything to know about the child tax credit for up to $3,600 per child and who qualifies.
Learn smart gadget and internet tips and tricks with our entertaining and ingenious how-tos.
Source by www.cnet.com