Have you already filed your tax return for the year? And did you report your unemployment payments in that return only to see the American Jobs Rescue Plan (ARPA) modify the need for some taxpayers to include that compensation?
If so, there’s no need to worry – or possibly amend your return – as the Internal Revenue Service recently announced it will refund money throughout the summer and spring to taxpayers who filed in advance of this recent spate of legislative changes.
ARPA allows those who earned less than $150,000 in modified adjusted gross income to exclude unemployment compensation – up to $20,400 if filing jointly and $10,200 for all other eligible taxpayers. The legislation only applies to unemployment payments in 2020, and the first refunds should start to arrive in May and stretch into the summer.
For those taxpayers who already have filed and figured their tax based on the full amount of unemployment compensation, the IRS will determine the correct taxable amount of unemployment compensation and tax. Any resulting overpayment of tax will be either refunded or applied to other outstanding taxes owed.
For those who have already filed, the IRS will do these recalculations in two phases, starting with those taxpayers eligible for the up to $10,200 exclusion. The IRS will then adjust returns for those married filing jointly taxpayers who are eligible for the up to $20,400 exclusion and others with more complex returns.
If you’re unsure if these changes apply to you or if you need accounting or tax support, Padgett has a national network of CPAs, enrolled agents, and other tax professionals available to help you. Give us a call today.