![]() ![]() IRS advises that for those who already filed returns, it will figure the proper amount of unemployment compensation and tax. The IRS said it will “take steps in the spring and summer to make the appropriate change to their return, which may result in a refund.” First refunds are expected in May and probably continue during the summer. The IRS announced this week it will “take steps to automatically refund money this spring and summer to people who filed their tax return reporting unemployment compensation before the recent changes made by the American Rescue Plan.”Ī. I filed my 2020 tax return before the $10,200 benefit was created. If you both received $10,200, for instance, and qualify for the break, you can subtract $20,400 from your taxable income, assuming your modified adjusted gross income is less than $150,000. Both my spouse and I received unemployment benefits last year. The good news is that you won't be punished if a crook uses your name and personal information to steal a tax refund from Uncle Sam.Q. ![]() That's certainly the case with the unemployment compensation tax refunds. Whenever the government starts sending checks, criminals will try to get their hands on some of that money. However, check with your state to see if it has its own form. You may be able to use Form W-4V to voluntarily have federal income taxes withheld from your payments. So, to avoid a big tax bill when you file your 2021 return next year, consider having taxes withheld from any remaining unemployment payments you receive this year.Ĭontact your state unemployment office to have federal income taxes withheld from your unemployment benefits. Withholding from Unemployment CompensationĪgain, the $10,200 exemption only applies to unemployment compensation received in 2020. Don't use the corrected AGI if the IRS adjusts your 2020 return to account for the unemployment exclusion. If you use your AGI, make sure to use the AGI as originally reported on Line 11 of your 2020 Form 1040 or 1040-SR. Next year, when you try to e-file your 2021 tax return, you will have to sign and validate your electronic return by entering your prior-year AGI or your prior-year Self-Select PIN. Second, don't file an amended return to claim the additional child tax credit or earned income tax credit if you reply to a notice from the IRS stating you may be eligible for one of these credits and you're not requesting any other changes to your 2020 tax return. ![]() If you're suddenly eligible for these credits when the unemployment exemption is applied, the IRS will calculate the credit for you and include it in any overpayment. First, you don't need to file an amended return to claim the recovery rebate credit, earned income tax credit with no qualifying children, or the premium tax credit even if it wasn't claimed on your return. There are two exceptions to this general rule. ![]() (These taxpayers may want to review their state tax returns as well.) That said, most taxpayers will need to file an amended return if they didn't originally claim the tax credit, or other credits like the additional child tax credit, but now are eligible because the exclusion changed their income, according to the IRS. The IRS, for example, can adjust returns for those taxpayers who claimed the earned income tax credit and, because the exemption changed their income level, may now be eligible for an increase in the tax credit amount which may result in a larger refund. 10 Year-End Moves to Lower Your 2021 Tax Bill ![]()
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