Did you receive unemployment in 2020? Did you properly file that as unemployment income when you did your taxes? If so, then you did the right thing. However, in mid-March 2021, President Biden signed The American Rescue Plan. As a result, you may receive up to $10,200 in unemployment tax breaks. Learn more about this here.
What Is the American Rescue Plan?
The American Rescue Plan is part of a nearly $2 trillion pandemic relief bill that President Biden signed in March 2021. Typically, when you receive unemployment, you pay taxes on those funds. However, the COVID-19 pandemic led to unprecedented levels of unemployment. Biden signed that plan to waive taxes on some of that unemployment income. In other words, it’s a means to reduce taxes paid on unemployment in 2020.
Who Is Eligible to Get $10,200 Unemployment Tax Breaks?
If you received unemployment in 2020, then you might be eligible for the American Rescue Plan. Moreover, if you filed your tax return before the American Rescue Plan went into law, you’re likely eligible for up to $10,200 in unemployment tax breaks. After all, if you filed properly, then you paid those taxes on your unemployment income. Now you’re eligible for a refund because you weren’t obligated to pay the taxes after all.
Married couples who both received unemployment are eligible for a combined $20,400.
However, if either single or married couples made over $150,000 in modified adjusted gross income (not including unemployment payments), then they are not eligible for the refund.
When Will I Get $10,200 in Unemployment Tax Breaks?
The IRS will issue refunds to those people who receive the tax breaks. They began issuing those refunds in May 2021. However, payments are going out throughout the summer to eligible individuals and families.
Individual (single) tax filers with simple taxes may have already received their refunds. After all, they’re the group first slated to receive the funds. Married couples and people with more complicated taxes will receive theirs after that first group. Therefore, if you haven’t received yours, yet, then it might just be because it’s still on the way.
What to Do If You Haven’t Received Your Refund, Yet
If you believe you’re owed the unemployment tax breaks, then you can take a few steps.
First, consider whether you’re in the first round of payments, as described above. If not, then you might want to wait a little bit longer before taking action. Your payment should come through this summer.
Likewise, you’re more likely to receive your refund quickly if you previously signed up for IRS Direct Deposit. If you didn’t, then your check will arrive in the mail. Keep an eye out for it.
Another consideration is whether you owe any outstanding taxes. If you do, then the payment will automatically go towards those taxes instead of directly to you.
Check to see if you’re owed this refund. More details here.
Tip: You May Need to File Form 1040-X
Finally, check to see if you need to file an amended tax return. This is the most important part although most people will not have to do this.
In some instances, the American Rescue Plan reduces your taxable income in such a way that you become eligible for a tax credit or tax deduction that you didn’t qualify for when you filed your taxes. If so, then you are now eligible to receive the refund. However, the IRS won’t automatically send it to you. Instead, you have to file Form 1040-X.
- Here’s What the CARES Act Could Mean For You
- 5 Non-Traditional Ways to Make Up For Unemployment Shortfalls
- Make Use of “Extra” Unemployment Money
If you enjoy reading our blog posts and would like to try your hand at blogging, we have good news for you; you can do exactly that on Saving Advice. Just click here to get started.