THE IRS is now sending $10,200 refunds to millions of Americans who have paid unemployment taxes.
Around 10million people may be getting a payout if they filed their tax returns before the big tax break in the American Rescue Plan became law.
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The new rules stipulate that unemployment benefit money is not earned income during the coronavirus pandemic.
This means you cannot be taxed on the money you got in 2020, CNET noted.
Last week, the agency started rolling out the first of the tax-break refunds to eligible Americans and will continue to do so during the summer.
The IRS will have to process and review tax returns and taxes paid on unemployment benefits to do this.
The amount people will actually receive will vary – and not everyone is going to get a refund.
In Joe Biden's stimulus bill, weekly $300 bonus unemployment payments are included, along with a third stimulus check – including plus up payments.
It also boosts the child tax credit to as much as $3,600 per child for hard-hit families pummelled by the virus.
There were around 23million people who filed for Pandemic Unemployment Assistance during the height of the crisis, the Bureau of Labor Statistics revealed.
People who were laid off, contractors, and self-employed people who aren't usually eligible for unemployment insurance were all able to file for jobless claims.
The American Rescue Plan Act, which was signed on March 11, included a $10,200 tax exemption for 2020 unemployment benefits.
The exemption, which applied to federal taxes, meant that checks sent during the pandemic weren't counted as earned income.
But because the change happened after some people filed their taxes, the IRS is issuing refunds for overpayments or it may use it to pay other taxes owed.
The $10,200 exemption applied to individual taxpayers who earned less than $150,000 in modified adjusted gross income.
While married couples filing jointly could exclude up to $20,400 of unemployment benefits from their earnings.
It should be noted, however, that this tax exemption doesn’t apply to state taxes in every state.
For example, New York State Budget Director Robert Mujica announced his state will still be taxing the first $10,200 of unemployment benefits from taxes in 2020 on the state level.
If you are owed money and you've already filed a tax return, the IRS will send you the money automatically.
You don't need to file an amended return in order to get this potential refund.
Instead, the IRS will adjust the tax return you've already submitted.
However, if you haven't yet filed your tax return, you should report this reduction in unemployment income on your Form 1040.
This will make sure your taxes due are calculated correctly from the start.
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