topic Does the new unemployment tax credit qualify me for the earned income tax credit? in Deductions & credits

Does the new unemployment tax credit qualify me for the earned income tax credit?

ckg1989 — Tue, 23 Mar 2021 00:59:01 GMT

I filed my taxes before the new unemployment tax credit came into effect. I understand the IRS will be figuring out how to refund the taxes you paid for the first $10,000 of what you received. I received $8,000 in unemployment benefits this year which put me $6,000 over the maximum you could earn for the EITC.

My question is, if the unemployment doesn't count as taxable income, does that now qualify me to receive the ETIC since it now puts me under the maximum earned to receive it? and if so, will I be refunded that money or do I need to wait to amend my return.

Re: Does the new unemployment tax credit qualify me for the earned income tax credit?

DaveF1006 — Tue, 23 Mar 2021 01:32:15 GMT

It depends. To claim the EIC:

you must have earned income AND
your Adjusted Gross Income (AGI) must be below the applicable limit.

It is possible that the reduction of your unemployment income may lower your adjusted gross income for the year and you may be able to claim EIC. To claim, you will need to amend your return after 3/26.

Re: Does the new unemployment tax credit qualify me for the earned income tax credit?

trboccuzpmp — Wed, 24 Mar 2021 21:16:50 GMT

Hi Dave,

I have a follow-up question. I saw today that there is no need to file an amended return and the IRS will take care of the unemployment tax waiver automatically for those earning $150,000 or less. My wife and I file our taxes jointly. Neither one of us make $150,000 individually, but combined we do. Does the $150,000 ceiling apply to the individual earnings or joint earnings. I had $6,000 dollars in unemployment benefits in 2020 and am wondering if i qualify. My wife is a front line worker and did not claim any unemployment benefit. Thanks for the taking the time to answer my question.

Re: Does the new unemployment tax credit qualify me for the earned income tax credit?

AmyC — Wed, 24 Mar 2021 23:09:26 GMT

@trboccuzpmp

MFJ with an AGI up to $150,000 not including the $6,000 of unemployment. That is AGI not just income. Check your tax return, line 11, for your AGI and subtract $6,000 of your unemployment to see if you qualify.

Re: Does the new unemployment tax credit qualify me for the earned income tax credit?

ckg1989 — Fri, 26 Mar 2021 15:26:28 GMT

Thanks for Responding Dave!

I saw now that the IRS is saying to not amend returns because they are going to take care of the unemployment tax. Will I still have to amend to claim EITC or will the IRS automatically adjust that for me...

Re: Does the new unemployment tax credit qualify me for the earned income tax credit?

Cynthiad66 — Fri, 26 Mar 2021 22:37:16 GMT

EITC is an automatic calculation relating to your Adjusted Gross Income. Since your adjusted gross income is changing, it will be automatically calculated.

Re: Does the new unemployment tax credit qualify me for the earned income tax credit?

djw1234 — Thu, 01 Apr 2021 17:47:31 GMT

Per the guidance released yesterday from the IRS (https://www.irs.gov/newsroom/irs-to-recalculate-taxes-on-unemployment-benefits-refunds-to-start-in-may) those of us that are now entitled to claim the EITC because of the unemployment tax waiver MUST file an amended return for that credit.

"There is no need for taxpayers to file an amended return unless the calculations make the taxpayer newly eligible for additional federal credits and deductions not already included on the original tax return.

For example, the IRS can adjust returns for those taxpayers who claimed the Earned Income Tax Credit (EITC) and, because the exclusion changed the income level, may now be eligible for an increase in the EITC amount which may result in a larger refund. However, taxpayers would have to file an amended return if they did not originally claim the EITC or other credits but now are eligible because the exclusion changed their income."

What I want to know now is if filing that amended return will slow down the automatic refund of the overpaid taxes.

Re: Does the new unemployment tax credit qualify me for the earned income tax credit?

gloriah5200 — Thu, 01 Apr 2021 21:02:55 GMT

IRS will not begin start sending out those refunds from the unemployment exemption adjustment until May.

If you will qualify for a new credit, then, Yes, you need to file an amended return. IRS will not adjust your return if you qualify for other credits, etc., only for the unemployment exemption.

I recommend you do file an amended return once IRS has finished processing the initial return filed.

Re: Does the new unemployment tax credit qualify me for the earned income tax credit?

PayPerPeddler — Thu, 01 Apr 2021 22:30:27 GMT

I need to amend because new calculations will help me become eligible for other subsidies. However TurboTax is saying my return is not ready to amend yet. It was accepted, filed and I received my refund about a month ago.

Re: Does the new unemployment tax credit qualify me for the earned income tax credit?

DaveF1006 — Thu, 01 Apr 2021 22:47:29 GMT

It depends. The amend feature is available in Turbo Tax. Try using another browser to access Turbo Tax or clear cache/cookies in your present browser. If you are using a phone app, try using the web-based browser rather than the app to complete your return.

Re: Does the new unemployment tax credit qualify me for the earned income tax credit?

PayPerPeddler — Thu, 01 Apr 2021 22:55:40 GMT

This did not work. Cleared everything. Used three different browsers. Same message. I am not able to amend.

Re: Does the new unemployment tax credit qualify me for the earned income tax credit?

djw1234 — Thu, 01 Apr 2021 23:11:45 GMT

I'm getting the same message and it says TT is waiting for guidance from the IRS before I can amend.

Re: Does the new unemployment tax credit qualify me for the earned income tax credit?

LinaJ2020 — Fri, 02 Apr 2021 02:07:48 GMT

If your AGI excluding the unemployment compensation meets the threshold, you will qualify. Click here: AGI requirements. Earned Income for ETIC does not include any unemployment compensation. However, your AGI amount will decide the amount of EIC you are entitled to at the end.

If you did not claim EIC on your original return, you would need to amend to re-claim. I am attaching an IRS link that explains it, click here: IRS update on unemployment compensation

@ckg1989

Re: Does the new unemployment tax credit qualify me for the earned income tax credit?

djw1234 — Fri, 02 Apr 2021 10:00:42 GMT

It looks like TT wants us to wait until next week to amend. Here's the link to their latest message.

https://ttlc.intuit.com/community/amend-tax-return/help/why-can-t-i-amend-my-return/00/2122917

Re: Does the new unemployment tax credit qualify me for the earned income tax credit?

Critter-3 — Fri, 02 Apr 2021 12:08:35 GMT

Changes to the programming doesn't happen overnight so everyone needs to be patient while everything gets updated for all the last minute tax law changes still being implemented during an ACTIVE tax season.

Re: Does the new unemployment tax credit qualify me for the earned income tax credit?

trboccuzpmp — Fri, 02 Apr 2021 14:14:22 GMT

Should I amend my return to obtain the full stimulus amount? The amount of unemployment I received placed me over the $150,000 threshold for the full stimulus amount, but under $160,000 cut-off. By subtracting the unemployment from my AGI, I will be under the $150,000 threshold. Will filing an amended return provide me the difference between what I received and the full stimulus amount?

Re: Does the new unemployment tax credit qualify me for the earned income tax credit?

PayPerPeddler — Fri, 02 Apr 2021 15:27:16 GMT

From my understanding, yes you should amend. I say this because your Modified Adjusted Gross Income needs to be under $150,000 for the exclusion to count in the first place. Please, somebody correct me if I am wrong.

Re: Does the new unemployment tax credit qualify me for the earned income tax credit?

Jhedges321 — Fri, 02 Apr 2021 16:06:41 GMT

My question is if I filed my return before we knew about the unemployment becoming not taxable, but I have not received any of my return yet, will ALL of my return be on hold until they release the payment in May? Or will they continue to process the returns and only the portion of the adjustments for unemployment we are supposed to receive come in May when those payments begin issuing?

Re: Does the new unemployment tax credit qualify me for the earned income tax credit?

djw1234 — Fri, 23 Apr 2021 14:32:31 GMT

For anyone that's been waiting to amend their 2020 return in order to claim credits that are now available due to the unemployment tax breaks in the American Rescue Plan, TurboTax is now allowing those returns to be amended. Just efiled mine a couple minutes ago.

Re: Does the new unemployment tax credit qualify me for the earned income tax credit?

AmyC — Thu, 29 Apr 2021 03:35:42 GMT

@Jhedges321 The IRS has been processing returns and sending refunds based on the original filing. Once the IRS begins going through the forms that contain unemployment, they will adjust the return and send the appropriate refund without changes in the various credits. Here is the original IRS article, IRS to recalculate taxes on unemployment benefits; refunds to start in May. The IRS is behind on everything so expect this to be pushed back as well. You should wait until the original is finally settled before amending.

[Edited 4/28/2021 | 8:34 pm PST]