Under The American Rescue Plan, this was signed into law on March 11, made the first $10,200 of unemployment income tax-free. For married couples filing jointly with less than $150,000 AGI in 2020, the tax break limit will be $20,400.
Since the law passed in the middle of tax season, some taxpayers had already filed and paid taxes on those benefits.
The IRS now has a plan to send-out refunds to taxpayers that filed earlier this year and paid taxes on those benefits.
Taxes of early filers will be recalculated for those eligible for the $10,200 exclusion for single individuals. Adjustments will also be done on married couples filing jointly, who is eligible for $20,400 tax exclusion.
Tax benefits phases -out for tax filers making more than $70,000 for individuals and $160,000 for married taxpayers filing jointly.
First round of refunds will be sent out in May and will continue throughout summer.
The IRS stated that they are working on a refund instead of amending your tax return.
Concerns on paying taxes with unemployment benefits could be stressful but filing your income tax earlier can give you more time to pay if you exceed the $10,200 threshold.
Are you concerned about tax dues on your unemployment benefits?
Let us know.
