$ 10,200 unemployment tax break
The American bailout plan waived federal taxes on up to $ 10,200 per person in unemployment benefits received in 2020.
However, President Joe Biden signed the $ 1.9 trillion Covid relief effort on March 11 – about a month after tax season began.
The tax break may result in some households being eligible for tax breaks that they did not qualify for based on their income when they originally submitted their taxes.
This is because the tax break technically excludes benefits from a taxpayer's income, thereby reducing the income on which he pays tax.
She may question that income reduction for income-based tax breaks like the Earned Income Tax Credit, according to the IRS.
"It's not a verdict," said Henry Grzes, senior manager of the tax practice and ethics team at the American Institute of Certified Public Accountants. "It's just a math exercise."
Changed tax return
Filing an amended return isn't a requirement – but people may be leaving money on the table if they don't, Grzes said.
Taxpayers do not have to file an amended tax return immediately. You will typically have up to three years from this year's tax deadline (May 17) to do so, Grzes said.
It's unclear how many taxpayers might need to file an amended tax return in order to maximize their refund. The IRS did not respond to a request for comment.
The agency will automatically issue refunds from May and continue working into the summer, the IRS announced on Wednesday.
According to the Century Foundation, around 40 million people received unemployment benefits in 2020. The average person received $ 14,000.
The unemployment tax cut is not available to taxpayers with a modified adjusted gross income of $ 150,000 or more. This upper income limit is the same regardless of the registration status (such as single or married), but the calculation excludes unemployment benefit.
Earned Income Tax Credit
Aside from the Earned Income Credit, there aren't many tax breaks that the unemployed are likely to be eligible for, Grzes said. You could also qualify for child and care credits, for example, he said.
Earned Income Tax Credit is a refundable tax credit available to taxpayers who received certain types of income in 2020, such as wages and self-employment income. Eligibility and amount vary depending on the number of children.
The maximum credit is $ 538 for taxpayers without children. This maximum is $ 6,660 for taxpayers with three or more qualified children.
Individual applicants without children can apply for Earned Income Tax Credit if their Adjusted Gross Income is less than $ 15,820. A filer with three children can earn and be eligible up to $ 50,594.
Married joint filers with no children are eligible on incomes up to $ 21,710. that rises to $ 56,844 for shared filers with three children.
The IRS may automatically adjust tax returns for those taxpayers who originally applied for Earned Income Credit and may now be eligible for an increase in the loan amount (and possibly a larger refund). In other words, no amended tax return would be required in this case.