Did You Receive Unemployment Income in 2020? Here’s What You Need to Know

The IRS plans to automatically process refunds for taxpayers who had unemployment income in 2020 and already filed their tax returns before the American Rescue Plan was signed into law on March 11.

balance-due noticesThe COVID-19 stimulus package includes provision that exempts the first $10,200 ($24,400 for joint filers) of unemployment compensation earned in 2020 from federal income taxes for individuals with adjusted gross income of less than $150,000.

Taxpayers should not file an amended return for 2020 to recoup the taxes they paid but don’t owe per the new rule.

People who had unemployment income in 2020 and have not yet filed their tax return may need to wait to ensure that they submit all information to the IRS correctly.

While the IRS has not finalized the process, it will release more details about the automatic refund.

3/25/21 Update: The IRS instructed taxpayers to include the unemployment income in modified AGI, but now they can exclude unemployment benefits from modified AGI.

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