“What if I filed my 2020 return before the American Rescue Plan Act & paid taxes on my unemployment?” This question has been on the minds of tax preparers and our clients all spring! We’re here with the answers you need.
Normally, any unemployment compensation someone receives is taxable. However, a recent law change allows some recipients to not pay tax on some 2020 unemployment compensation.
The IRS will automatically refund money to eligible people who filed their tax return reporting unemployment compensation before the recent changes made by the American Rescue Plan. These refunds are expected to begin in May and continue throughout summer.
Under the new law, taxpayers who earned less than $150,000 in modified adjusted gross income can exclude some unemployment compensation from their income. This means they don’t have to pay tax on some of it. People who are married filing jointly can exclude up to $20,400 – up to $10,200 for each spouse who received unemployment compensation. All other eligible taxpayers can exclude up to $10,200 from their income.
Even if you filed your taxes before the American Rescue Plan Act went into effect, the IRS will adjust your return with no further action on your part.
If you still have questions, we don’t blame you! Our professional staff is available to answer them and talk through any of your tax needs – call us at 814-333-2488 or email at firstname.lastname@example.org