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BanArt
Level 2

2020 Unemployment Benefits

In an email from you, Turbotax, there was an indication that we might be getting an adjustment to the taxation of the UI benefits, and this was in lieu of the 3rd stimulus check.  Is that still the case?  Have there been any official changes yet, or are we still waiting to see what they do?

4 Replies
newenglandpro
Employee Tax Expert

2020 Unemployment Benefits

Hello!

In answer to your questions  about another adjustment to the taxability of unemployment benefits the answer is congress is not planning another adjustment to the taxability of unemployment benefits at this time.  Congress has no plans to provide tax benefits in lieu of a 3rd stimulus payment.

Rumors abound but there are no facts to support these two particular rumors.

As we all know anything can happen in the future and everything is negotiable in congress so there is always a possibility of a change tax and benefits.

 

Hope this helps! If not reach out to connect again for additional information!

 

BanArt
Level 2

2020 Unemployment Benefits

You said "additional" in  talking about the relief.  I'm talking about any initial relief from the taxation on the UI benefits I received in 2020 and claimed on my tax return.

 

ismailm615
Employee Tax & Finance Expert

2020 Unemployment Benefits

Hi @BanArt 

 

The American Rescue Plan Act of 2021, which became law in March, excluded up to $10,200 in 2020 unemployment compensation from taxable income calculations. The exclusion applied to individuals and married couples whose modified adjusted gross income was less than $150,000.

 

For most taxpayers, the IRS will adjust their tax return and send a refund for the unemployment compensation adjustment. In certain cases, an amended return is needed to get the correct adjustment. See the IRS article below. 

 

https://www.irs.gov/newsroom/irs-continues-unemployment-compensation-adjustments-prepares-another-1-...

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ReneeTAXEA1
Employee Tax Expert

2020 Unemployment Benefits

Thank you for contacting TurboTax Live!  We see that you had a question - about unemployment and your additional tax refund, that you have not yet received!  We thank you for your question!

 

We saw in your reply to the original response from our TurboTax Live! Community - that you were asking about "additional" in  talking about the relief - and that in your initial question - you were speaking of any initial relief from the taxation on the UI benefits I received in 2020 and claimed on my tax return.

 

As such, we did a comprehensive review of our TurboTax Live! resources and IRS rules and procedures, and here is some additional detail for you to review, in answer to your question:

 

We checked our resources - here at TurboTax Live! and at the IRS, and here is what we learned:

How will I receive my additional unemployment refund amount from the IRS? 

The IRS will issue refunds resulting from this unemployment income relief by direct deposit for taxpayers who provided bank account information on their 2020 tax return. 

If valid bank account information is not available, the refund will be mailed as a paper check to the address of record. The IRS will continue to send refunds until all identified tax returns have been reviewed and adjusted.

These refunds are subject to normal offset rules such as past-due federal tax, state income tax, state unemployment compensation debts, child support, spousal support or student loans. The IRS will send a separate notice to the taxpayer if the refund is offset to pay unpaid debts.

How do I know if I am now eligible for additional deductions and credits, and what do I do to get them?

It’s a bit tricky.

The IRS will adjust your return and the amounts for any deductions and credits you claimed on it. For example, say you claimed the Earned Income Tax Credit (EITC) on your return. And because the new unemployment exclusion changed your income level, you would now be eligible for an increase in EITC amount. The IRS would adjust your return for you and send you the additional refund amount with your additional unemployment benefits. You are all set.

The IRS is also making corrections to Earned Income Tax CreditPremium Tax Credit and the Recovery Rebate Credit since taxpayers may be eligible for these credits with the $10,200 income exclusion.

However, say you were not originally eligible for the EITC on your return, but now, because the exclusion changed your income, you are eligible for the EITC. You may need to amend your return to claim that new credit based on your tax situation:

  • The IRS can adjust tax returns for those who are single with no children and the exclusion makes them eligible for EITC.  
  • Taxpayers who have qualifying children and become eligible for any new benefits once the exclusion is calculated may have to file an amended tax return to claim new benefits.

If you chose not to amend your return, you’d only get the additional unemployment benefits automatically from the IRS and would miss out on additional money you’d be eligible for. 

The IRS can also adjust tax returns that already include EITC and qualifying children. If you filed with TurboTax, check your inbox. We sent you an email to help you understand how all this affects you and with instructions on what to do.

 

https://blog.turbotax.intuit.com/tax-news/am-i-eligible-for-the-new-unemployment-income-relief-49427...

 

We trust and hope that this resource detail assists you in resolving your Question, and thank you for choosing TurboTax Live!

(If this supplementary detail is still not what you were looking for - please reply to this message!  TY!)

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