Here’s how you can get a $10,200 tax break from the IRS if you got unemployment benefits in 2020
PEOPLE who were on unemployment in 2020 may be able to get a tax break this year.
If you received unemployment insurance benefits in the US in 2020 and paid taxes on the benefits, you may be eligible for an additional refund from the IRS.
The American Rescue Plan Act included a $10,200 tax exemption that gives people who paid on those benefits a tax break on the unemployment benefits they received, at least for federal taxes.
The IRS is set to refund money to people who filed their tax returns before the unemployment tax break changes in the Plan regarding the exempt UI taxes went into effect.
If you are owed money thanks to this tax exemption and due to having already completed your tax return, the IRS will send you the money automatically.
You do not need to file an amended return in order to get this potential refund.
However, it’s not totally clear when the checks will arrive. They will likely begin to go out after May 17, when taxes are due in the US, and possibly go out through the summer.
"This new clarification from the IRS is good news for the millions of taxpayers impacted, but may still be confusing," Mark Steber, chief tax officer for Jackson Hewitt, told CNET.
"Some taxpayers may have questions as to the timing of any payment and whether it will come in a check or other form. The IRS is still providing clarification on these and other questions related to the just-announced program.”
It should be noted, however, that this tax exemption doesn’t apply to state taxes in every state.
For example, New York State Budget Director Robert Mujica announced his state will still be taxing the first $10,200 of unemployment benefits from taxes in 2020 on the state level.
There’s good news for taxes when it comes to parents, however. They will be eligible to claim up to $16,000 in childcare expenses when this year’s taxes have been filed.
Parents can claim up to $8,000 for one child or up to $16,000 for multiple kids, according to Garrett Watson, senior policy adviser analyst at The Tax Foundation.
To qualify, your household’s gross income must be less than $125,000, or the tax credit will phase out at 50 percent.
Parents will not be able to claim the deduction until next year once 2021 tax returns are filed.
This could all mean more money back for many Americans waiting to see if a fourth round of stimulus checks are on the horizon.
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