Last week, the Internal Revenue Service said that another 1.5 million taxpayers will be receiving refunds averaging more than $1,600. The IRS is adjusting unemployment compensation from previously filed income tax returns as a result of the American Rescue Plan Act of 2021, which was passed in March. It excluded up to $10,200 in 2020 unemployment compensation from taxable income calculations. The exclusion applied to individuals and married couples whose modified adjusted gross income was under $150,000.
Refunds should be expected soon, as those arriving by direct deposit were set to begin July 28 and refunds by paper check began July 30.
Most taxpayers will not need to take any extra steps to receive this refund.
How do I know if I should file an amended return?
Taxpayers should file an amended return if they:
- did not submit a Schedule 8812 with the original return to claim the Additional Child Tax Credit and are now eligible for the credit after the unemployment compensation exclusion.
- did not submit a Schedule EIC with the original return to claim the Earned Income Tax Credit (with qualifying dependents) and are now eligible for the credit after the unemployment compensation exclusion.
- are now eligible for any other credits and/or deductions not mentioned below. Make sure to include any required forms or schedules.
Taxpayers do not need to file an amended return if they:
- already filed a tax return and did not claim the unemployment exclusion; the IRS will determine the correct taxable amount of unemployment compensation and tax.
- have an adjustment, because of the exclusion, that will result in an increase in any non-refundable or refundable credits reported on the original return.
- did not claim the following credits on their tax return but are now eligible when the unemployment exclusion is applied: Recovery Rebate Credit, Earned Income Credit with no qualifying dependents or the Advance Premium Tax Credit. The IRS will calculate the credit and include it in any overpayment.
- filed a married filing joint return, live in a community property state, and entered a smaller exclusion amount than entitled on Schedule 1, line 8.
If you need assistance filing an amended return or preparing tax forms, feel free to call us at 816-524-4949 or visit our website at hoorfarlaw.com.