Protecting yourself against unemployment fraud
Blake Burman on unemployment fraud
Americans who collected unemployment benefits last year could soon receive a tax refund from the IRS on up to $10,2000 in aid.
The $1.9 trillion coronavirus stimulus plan that President Biden signed into law in March, known as the American Rescue Plan, waives federal income taxes on up to $10,200 in 2020 unemployment insurance benefits for individuals who earn less than $150,000 a year.
But some Americans filed their taxes before Biden signed the stimulus bill into law, leaving them unable to take advantage of the benefit. The IRS advised them to not file another return and promised to automatically refund the money.
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Payments are expected to begin going out sometime in May, the agency previously said.
"Because the change occurred after some people filed their taxes, the IRS will take steps in the spring and summer to make the appropriate change to their return, which may result in a refund," the IRS said. "The first refunds are expected to be made in May and will continue into the summer."
The agency said it will do the recalculation in two phases, beginning with taxpayers who are eligible for the $10,200 exclusion. It will then proceed to calculate the new refund for married couples who are eligible for the $20,400 exclusion and other more complex returns.
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"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," the agency said.
You're eligible for the tax refund if your household earned less than $150,000 last year, regardless of filing status. Workers can exclude the aid when calculating their modified adjusted gross income — meaning that an individual who earned $140,000 last year but collected $10,200 in jobless aid is still eligible to take advantage of the tax break.
The break applies to this tax-filing season, which began Feb. 12 and ends May 17.
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The federal government and most states count unemployment benefits, including the extra money distributed through federal aid programs, as taxable income. But unlike a typical paycheck, taxes aren't automatically deducted from jobless aid, creating a potential for refund shock for millions of out-of-work Americans even though they lost their job.
About 40 million people collected jobless aid last year, according to The Century Foundation. The average person received $14,000 in benefits.
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