Should My Unemployment Refund Have Been Higher Than $391? $527 Is Written on Lines 16 and 24.

Should I Have Received More Than 391 for My Unemployment Refund? Lines 16 & 24 Both Say $527

Unemployed last year and filed your 2020 tax return early? (or a deposit in your bank account). The IRS has begun refunding taxpayers who filed 2020 returns and claimed unemployment benefits before the American Rescue Plan changed the tax laws.

The IRS recently issued 430,000 refunds totaling $510 million, each worth $1,189. The total 2020 exclusion is over 11.7 million returns totaling $14.4 billion.


UC Exemption

This year’s unemployment benefits (up to $10,200 for married couples filing jointly) are tax-free. Unemployment benefits over $10,200 are still taxed.

An estimated ten million taxpayers who filed before the plan took effect were identified by the IRS. Either a refund or a reduced tax bill will result. (The IRS’s Interactive Tax Assistant can tell you if unemployment benefits are taxable.)

The IRS recalculated single taxpayers who did not claim children as dependents or any refundable tax credits. The IRS then targeted complicated returns and married couples entitled to a $20,400 exemption.

Keep in mind that the tax break is only for 2020 unemployment. From 2021 onward, expect to pay federal unemployment tax.

UI Refunds

In 2020, if you owe a refund, the IRS will deposit it directly into your bank account. If you don’t have a bank account, the IRS will send you a check. If your account is closed, your refund will be returned to the IRS. So long as all identified tax returns are examined and modified.

The IRS will notify you of changes. Expect a 30-day notification after the change. Keep any IRS notices for your records and check your return afterward.

Restriction on refunds: Child support, spousal support and certain federal non-tax debts may reduce or eliminate the amount you receive (i.e., student loans). If your return is used to pay back taxes, the IRS will notify you.

If so, how?

If your revised AGI qualifies you for additional federal credits and deductions, you may need to file an amended return.

This means that the IRS may revise returns for taxpayers who claimed the earned income tax credit and whose income increased due to the exemption. The IRS says most taxpayers who didn’t previously qualify for the tax credit or other benefits like the extra child tax credit will need to file an amended return. (Taxpayers should also review state returns.)

Two exceptions exist. The recovery rebate credit earned income tax credit without qualifying children, and premium tax credit do not require an updated return. The IRS will compute your unemployment credit and include it in any overpayment. Don’t seek any other adjustments to your 2020 tax return unless you qualify for one of these credits.

Return for 2021

In order to e-file your 2020 tax return, you’ll need to provide your previous year’s AGI or Self-Select PIN. Use your AGI from your 2020 Form 1040 or 1040-SR Line 11. When filing your 2020 tax return, don’t use the IRS’s corrected AGI.

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The $10,200 exemption is only for 2020. Envisage having taxes deducted from any unused unemployment benefits this year.

Contact your state’s unemployment office to deduct federal taxes. You can use Form W-4V to withhold taxes from your paychecks. Your state may have its own. Use state form.

Job Fraud Victims

Criminals will immediately try to obtain government cheques. Unemployment tax refunds are no exception. The good news is that identity thieves will not be prosecuted.

So, if you receive a Form 1099-G for unemployment benefits you didn’t receive, the IRS won’t tax it. Notify the state workforce agency.

State taxes?

Just because the federal government will not exempt the first $10,200 of your 2020 unemployment benefits. Learn About Unemployment Taxes: Find out if your state has accepted the federal exemption.