IRS Announces it Will Automatically Correct Tax Returns for Unemployment Tax Breaks
The IRS recently announced that it will start to automatically correct tax returns for those that filed for unemployment in 2020 and also qualify for the $10,200 tax break, Forbes reported.
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The tax break is part of the American Rescue Plan stimulus relief bill which President Joe Biden signed into law as of March 11.
Typically, these kinds of unemployment benefits are fully taxed by the IRS and are reported on your federal tax return. As a result of the relief bill, these benefits are not subject to tax.
If you received unemployment benefits in 2020, you likely received a 1099-G form from your state unemployment insurance agency officially stating how much money you received in 2020 and how much you paid in taxes.
This form needs to be filed along with our taxes. Some states will do it for you, but you need to confirm that it’s done.
Doing so could potentially save you thousands of dollars. Forbes stated that if you qualify for the $10,200 tax break, are single and are in the 22% tax bracket, you could qualify for a tax savings of $2,244. If you are married and each spouse qualifies for the break, you could save up to $4,488.
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Since the bill was signed into law in March, millions of Americans had filed their taxes without knowledge of the tax break. The IRS has also identified 10 million individuals who filed before the relief was available and announced that they will automatically adjust their returns for them. This is a little under half of the 23 million Americans who filed for unemployment insurance during the Covid-19 crisis.
The IRS added that 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.”
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