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Following the passage of the American Rescue Plan Act in 2021, taxpayers whose annual income was under $150,000 were eligible to exclude $10,200 in unemployment earnings from their 2020 taxes. For married couples filing jointly, each spouse was eligible to exclude that figure.
For taxpayers who may have overpaid when it comes to unemployment compensation for 2020, the IRS will issue corrections – and even refunds. After reviewing Forms 1040 and 1040-SR, which identified taxpayers who were eligible for this tax credit, the IRS was able to calculate any errors from 2020.
What taxpayers can expect
So, what should taxpayers expect from this amendment to 2020 taxes?
Each individual is likely to have a different experience. However, if your account was corrected, you will receive correspondence from the IRS detailing the changes. The correction could mean an additional check from the IRS, or it could translate to a correction on adjusted income on your 2020 tax return.
Taxpayers should pay close attention to the following tax credits, as the adjusted returns could show up in: the Earned Income Tax Credit, the Recovery Rebate Credit, the Additional Child Tax Credit, the American Opportunity Tax Credit, the Premium Tax Credit, or the Advance Premium Tax Credit.
What to do if you haven’t received corrections from the IRS
While the IRS reported that 14 million returns were adjusted, and 12 million taxpayers received refunds, the agency has advice for taxpayers if their account hasn’t been updated but they were eligible for the unemployment compensation exclusion.
The IRS recommends filing an amended tax return for 2020, detailing eligibility for the exclusion, as well as any potentially refundable credits.
For taxpayers who may not know if they are eligible for a correction to their 2020 taxes, or who may have questions about corrections to their 2020 taxes, more information is available here.