Will I receive the unemployment tax break, if I opted out of paying federal?

[fanfare]

"I opted out of paying federal"

what does this mean?

[xmasbaby0]

Do you mean your tax return showed that you owed tax due to the IRS and you did not pay the tax?  Is that what you mean by "opted out of paying..?"   Please explain.

[VolvoGirl]

I think he means he didn't have federal withholding taken out of the unemployment checks.  

If you filed early before the 10,200 unemployment exemption you have have paid tax on it.   The  IRS will recalculate your return for the new 10,200 unemployment exemption for you. 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.

[rjs · Accepted solution]

@octaviacarpenter 

If you mean that you did not have federal tax withheld from your unemployment benefits, that has nothing to do with whether you will get the unemployment exclusion.

You are eligible for the unemployment exclusion if you received unemployment benefits and your Adjusted Gross Income (AGI), not including the unemployment, is less than $150,000.

You didn't say whether you have already filed your 2020 tax return. If you have not yet filed your tax return, and you are eligible for the unemployment exclusion, you will get the exclusion on your tax return when you file it.

If you have already filed your tax return, and you are eligible for the unemployment exclusion, you will get a refund for the exclusion if you did not already get the exclusion on the tax return that you filed. Look at Schedule 1 in the tax return that you filed. If there is a negative amount on Schedule 1 line 8, with the abbreviation UCE on the dotted line to the left of the amount, that is the unemployment exclusion, so you already got it.

If Schedule 1 line 8 is blank, the IRS will recalculate your tax return and send you a refund for the unemployment exclusion, if all of the following are true.

• There is unemployment income on Schedule 1 line 7.
• Your tax on Form 1040 line 16 is not zero.
• Your Adjusted Gross Income (AGI), not including unemployment, is less than $150,000. In other words, Form 1040 line 11 minus Schedule 1 line 7 is less than $150,000.

It might be a couple of months before you get the refund.

[octaviacarpenter]

Thank you!  Exactly what I needed to know.