IRS to issue additional refunds to some Americans who were on unemployment in 2020

Taxes IRS AP
Posted at 1:46 PM, Mar 31, 2021
and last updated 2021-03-31 17:03:07-04

If you filed your taxes early and received unemployment income in 2020, you may receive a refund from the IRS.

IRS announced Wednesday that it will be sending refunds to some Americans who were received unemployment compensation in 2020.

Unemployment is considered taxable income, but the American Rescue Plan, which was signed into law earlier this month, allows some unemployment income to be excluded. The law allows Americans earning less than $150,000 to exclude up to $20,400 on unemployment income if married filing jointly and $10,200 for all other eligible taxpayers.

The change only applies to unemployment income received in 2020.

Because the law was signed during the midst of tax season, some Americans had already filed 2020 taxes. For those who already filed taxes and were eligible for the deduction in income, the IRS said it will be sending refunds starting in May and continuing through the summer. The IRS said that these refunds will be automatic, and that affected Americans will not need to submit an amended return.

Federal data found that 23 million Americans received unemployment benefits at some point in 2020.

If you have not filed taxes for 2020, the IRS has published information to help taxpayers navigate submitting unemployment income.

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If you’re wondering how you’re affected, not to worry, we have your back. We’re doing the work to make sure our products are up to date and that you can use them to file your taxes with complete confidence.

That said, many folks are wondering what’s in the bill and how it might affect them. Here’s a recap of some of the major tax provisions in the new tax bill and how they may impact you.

Increased Standard Deduction: The new tax law nearly doubles the standard deduction amount. Single taxpayers will see their standard deductions jump from $6,350 for 2017 taxes to $12,000 for 2018 taxes (the ones you file in 2019). Married couples filing jointly see an increase from $12,700 to $24,000. These increases mean that fewer people will have to itemize. Today, roughly 30% of taxpayers itemize. Under the new law, this percentage is expected to decrease.

Increased Child Tax Credit: For, families with children the Child Tax Credit is doubled from $1,000 per child to $2,000. In addition, the amount that is refundable grows from $1,100 to $1,400. The bill also adds a new, non-refundable credit of $500 for dependents other than children. Finally, it raises the income threshold at which these benefits phase out from $110,000 for a married couple to $400,000.

Personal and Dependent Exemptions: The bill eliminates the personal and dependent exemptions which were $4,050 for 2017 and increased to $4,150 in 2018. State and local taxes/Home mortgages: The bill limits the amount of state and local property, income, and sales taxes that can be deducted to $10,000. In the past, these taxes have generally been fully tax deductible. The bill also caps the amount of mortgage indebtedness on new home purchases on which interest can be deducted at $750,000 down from $1,000,000 in current law.

Health Care: The bill eliminates the tax penalty for not having health insurance after December 31, 2018. It also temporarily lowers the floor above which out-of-pocket medical expenses can be deducted from the current law floor of 10% to 7.5% for 2017 and 2018. So for 2018, you can deduct medical expenses that are more than 7.5% of your adjusted gross income as opposed to the higher 10%.

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Don’t worry about memorizing these tax changes the majority of which are for 2018 taxes that you file in 2019. Fastax has you covered and will be up to date with the latest tax laws. Call us for tax help at 661 493-8512