If you are among the 40 million Americans who received unemployment benefits in 2020 and have already filed your taxes, you might get a surprise refund.
The IRS announced that starting in May, it will issue refunds to taxpayers who have filed tax returns but qualify for a tax return Unemployment benefit tax break 2020. Refunds will continue into the summer months.
Unemployment benefits are usually taxed as ordinary income. However, the US $ 1.9 trillion bailout plan signed by President Joe Biden on March 11th protects the first $ 10,200 in unemployment benefits for households with incomes below $ 150,000. If you are married, either spouse can exclude the first $ 10,200 in unemployment benefits.
The new law, passed in the middle of the tax season, asked people who had qualified for the tax break whether they needed to file an amended tax return. But the IRS says this won’t be necessary. The IRS will automatically reconfigure the correct amount of unemployment benefit and taxes due and then either issue additional money as a refund or apply it to taxes owed.
It’s not clear if you need to file an amended tax return if the tax break entitles you to certain tax credits, such as the Earned Income Tax Credit.
You may still not get a discount on state taxes
Your state may not feel quite as generous as Uncle Sam. According to the H&R Block, the following 13 states have yet to make changes to exempt some unemployed from state taxes:
- North Carolina
- new York
- Rhode Island
- South carolina
- West Virginia
H&R Block has proposed that if you live in any of these 13 states and are receiving unemployment benefits in 2020 if your state changes its law, H&R Block has proposed on hold.
What if I haven’t submitted yet?
If you haven’t filed your taxes yet, you can use them free tax return software to submit your return. They will ask you a few questions to determine if you qualify for the unemployed tax break.
The IRS did Instructions on his website for those filing a paper return. However, we strongly recommend submitting online. The IRS has a large backlog of unprocessed paper returns from 2019. Paper filing can add months to the time it takes to process your return.
If you can’t afford your tax billEven after the unemployed tax break, it is important that you file your taxes or apply for an extension by May 17th. Take note of this Filing an extension You only have time to file, but any money you owe is technically still due on May 17th – a month later than usual due to the Extension of the tax period. By filing a return on time, even if you can’t pay anything, you’ll minimize your penalties.
Once you can resume payments, you can usually be automatically approved for an online payment plan within minutes. In some cases, if you sign up for an IRS installment plan, you can spread the bill over up to 72 months.
It should be noted that the unemployment tax credit is only valid for 2020. If you continue to receive benefits, consider automatically withholding 10% by filing the IRS Form W-4V if you won’t be billed for doing so.
Robin Hartill is a certified financial planner and senior writer at The Penny Hoarder. She writes the Dear Penny personal finance advisory column. Send your tricky money questions to AskPenny@thepennyhoarder.com.
This article originally appeared on www.thepennyhoarder.com