Tax Refunds for Unemployment Income Start in May
Taxpayers are eligible to exempt $10,200 ($24,400 for joint filers) in unemployment income from federal income taxes in 2020 if they earned less than $150,000 in modified adjusted gross income.
Because the change occurred after some people filed their taxes, the IRS will take steps in the spring and summer to make the appropriate change to their return, which may result in a refund. The refunds will continue into the summer.
The IRS will determine the correct taxable amount of unemployment compensation and tax for those who already have filed and figured their tax based on the full amount of unemployment compensation. Any resulting overpayment of tax will be either refunded or applied to other outstanding taxes owed.
The IRS will do the recalculations in two phases, starting with those taxpayers eligible for the up to $10,200 exclusion. The IRS will then adjust returns for joint filers who are eligible for the up to $20,400 exclusion and others with more complex returns.
Taxpayers don’t need to file an amended return unless the calculations make them newly eligible for additional federal credits and deductions not already included on the original tax return.
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