Unemployment tax relief

[TrellzD2021]

I filed my taxes in February 2021. And I received my refund back in May 2021. But it did not include the unemployment tax refund because when I received unemployment I elected for them to automatically withdraw taxes.. so with that being said. Am I not entitled to the unemployment tax refund? And I heard i did not have to file an amendment but do I need to or what do I need to do to get this refund.

[Nancy M5]

Hello.  The refund you received in May 2021 is not directly related to the taxes that were withheld from your unemployment checks.  You will need to look at your return in total to see how the refund was calculated.  

Schedule 1 of your Form 1040 will include the unemployment benefits you received as income on line 7.  From that amount you can deduct $10,200 of nontaxable unemployment benefits or the amount on line 7, whichever is less.

The total from Schedule 1 flows through to line 8 on your Form 1040 and is included with your other income and deductions to arrive at taxable income on line 15 at the bottom of page 1.  The tax due on your taxable income is located on line 24 and when combined with the total amount of your withholdings and other payments on line 33 results in a refund or amount due.

The IRS would have done these calculations for you when they sent your refund this past May.  You will not need to file an amended return unless these tax calculations are incorrect.  I would start by comparing the return that you filed in February to the IRS calculations in May.

[ronaldg11]

Hi TreLLzD2021,

To answer your two questions about whether or not you're entitled to an unemployment exclusion tax refund and whether or not you have have to file an amendment to get the refund please see the info below about eligibility and the filing of an amendment:

Eligibility:

In short, eligibility for the unemployment compensation exclusion depends on whether or not your unemployment compensation was received in 2020 and your modified adjusted gross income (AGI) was less than $150,000. 

To determine if you were under the $150,000 threshold and therefore qualify for the exclusion, subtract all of the unemployment compensation reported on Schedule 1, Line 7, from the amount of your AGI reported on Line 11 of Form 1040, 1040-SR, or 1040-NR.

If you're eligible, you're allowed to exclude up to $10,200 of your unemployment compensation from income on your 2020 Form 1040, 1040-SR, or 1040-NR. This means up to $10,200 of unemployment compensation is not taxable on your 2020 tax return but please note... unemployment compensation amounts over $10,200 are still taxable.

https://www.irs.gov/newsroom/2020-unemployment-compensation-exclusion-faqs-topic-a-eligibility

Filing An Amendment:

What if I already filed my 2020 tax return? Do I need to file a Form 1040-X to amend my tax return to report the exclusion? 

Unless you're entitled to a new credit or additional deductions there's no need to file an amended return (Form 1040-X) to report the amount of unemployment compensation to exclude. The IRS will perform the corrections starting in late May and continue throughout the summer and into the fall.

If you already filed your tax return, we'll determine the correct taxable amount of unemployment compensation and tax. We'll also adjust any non-refundable or refundable credits that you reported on your return that are impacted by the exclusion. In addition, if you did not claim the Recovery Rebate Credit, Earned Income Credit with no qualifying dependents or the Advance Premium Tax Credit on your tax return, but are now eligible when the unemployment exclusion is applied, you do not need to file an amended return. The IRS will calculate the credit for you and include it in any overpayment.

https://www.irs.gov/newsroom/2020-unemployment-compensation-exclusion-faqs-topic-d-amended-return-fo...

Hope that answers your questions,

Ron G, TurboTax Live Expert, CPA