Unemployment Tax Refund Issue

[cardinal_jake]

I paid my tax before they passed the law saying unemployment income was untaxed. I then received a refund from the IRA for the unemployment Tax since it changed my return. However, I never was refunded or credited with the amount of tax I already paid. I called the IRS and they stated they did not know how to handle people in my situation.

[xmasbaby0]

This is very confusing

"I paid my tax..."

"I received a refund...."

"I was never refunded or credited....."

What do you think you were not refunded for?

[cardinal_jake]

Ok. I will try to clarify. I filed my taxes early, before the law changed, and because I had unemployment income taxed I had to pay the IRS taxes due (as an example, let's day I paid $500 in taxes due). I paid those due taxes.

Later, the law changed and I discovered that unemployment income would be tax free (my unemployment income was below the $10,500 limit). I corrected my return which showed I was now due a refund (for an example, I was now owed $1,000 from the IRS). However, I did not file an amended return because I received an email from TurboTax which stated not to file an amended return.

Then, I received a refund from the IRS (for an example it was the $1,000 amount). I did not get credit for the taxes I had paid earlier ($500 for example).

My question is why wasn't that amount added to my refund? If I had waited and not filed my taxes when I did, I would be owed a $1,000 refund as the example. But I paid taxes due before the law change and only received back the $1,000 example from the IRS. I believe I should receive $1,500 back per the example ($1,000 refund plus $500 I paid in taxes before the law changed).

I contacted the IRS and explained the situation when I received the example $1,000 refund, and they explained they were not sure how they would handle people in my situation and were waiting on further guidance.

[xmasbaby0]

We cannot see your tax return.   Was the unemployment the only income you received?   or was there other income from some other source on your return?   The new tax law says that the first $10,200 of your unemployment is not subject to federal tax----but you might have had other income that was taxable, so expecting every cent that was withheld from your unemployment may not be realistic.

[cardinal_jake]

I understand that. This is my situation using example numbers.

Subject had income, including unemployment income, in 2020. Subject files taxes before the law changed and owes $500. This is accounting for everything in the return (all deductions, income, credits, etc...)

The law changed excluding the first $10,200 in unemployment income. Subject completes an amended return which now shows Subject is due a $1,000 refund. Again, this is accounting for everything in the return (all deductions, income, credits, etc...). Subject doesn't file the amended return at the guidance of TurboTax. Subject later receives $1,000 refund but not the $500 Subject had already paid.

So, if Subject had waited to file taxes until after the law change Subject would get a $1,000 refund. But Subject did not, filed early, paid $500 in owed taxes, and then received $1,000 refund. It should be noted that Subject did not receive an adjusted amount due to income changes, or other changes with filing. Subject received the exact amount of $1,000.

The question is, how can the Subject earn the same refund as if he had not filed taxes before the law change, and not receive back the $500 which was paid before the law changed. Also, Subject contacted the IRS who told Subject they were aware of this issue but did not know how they would handle it.

[VolvoGirl]

I think the 1,000 refund is including the 500 tax due you paid.  Otherwise it would just be a 500 refund.  The amended return should have the 500 paid on line 16.  

[cardinal_jake]

Except that is not the case. Again, if the subject had waited to file a return, the subject would of received a $1,000 refund. Subject did eventually receive the $1,000 refund. But the subject also paid $500 in taxes which would not of been due if the subject did not file the return before the law change.

[VolvoGirl]

I would set up a new online account and do a test return now and see what refund you get.  You don't have to pay any fees unless you use a paid version and want to print it.  You can preview without paying.

How to start another return in the Online version

https://ttlc.intuit.com/community/using-turbotax/help/how-do-i-start-another-return-in-turbotax-onli...

[Hal_Al]

Based on a less than $10,000 reduction in income, the $500 was, most likely, included in the $1000.  You're not entitled to another $500.

But, as others have suggested, the only way to be sure is to prepare an alternate return and compare.

[Critter-3]

If you are due a refund of the taxes you paid on the original return then the IRS will eventually catch onto that and refund you the excess that you paid. But before I would hang my hopes on that I would definitely do as others have Suggested and do a test return and or use the amendment process to see what you really were eligible for after the exclusion of the unemployment.

[fanfare]

I'm not sure how you can get the Unemployment adjustment before you get your regular refund.

But I guess it is possible.

the thing you can do is go to IRS.gov and setup up "your account". then you can get a transcript of your return and see what the IRS did to your return and other information.

If you look at your marginal tax rate you will know how much tax you paid on unemployment compensation.