The Internal Revenue Service recently completed the final corrections for 2020, an unemployment tax break issuing $14.8 billion in tax refunds to 12 million people.
The IRS Completes Tax year 2020 Corrections
The IRS corrected the tax returns because of a change in the American Rescue Plan Act of 2021, which became law in March 2021. Worth $10,200 of unemployment compensation for individuals with modified adjusted gross income less than $150,000. To ease the burden on taxpayers, the IRS provides financial assistance to millions of people who were laid off or lost jobs during the COVID-19 pandemic and received unemployment benefits as a result.
Before the law’s enactment, IRS already review Forms 1040 and 1040-SR that were filed to identify taxpayers who had already reported unemployment compensation as income and were eligible for the correction. Many people, already received unemployment aid in 2020, who filed their 2020 federal tax returns without the benefit of the unemployment compensation exclusion.
Approximately 12 Million Refunds
Nearly 12 million givebacks totaling $14.8 billion, with an average refund of $1,232. That automatic correction process is now complete and 12 million people were issued so-called unemployment tax refunds because of the corrected 2020 tax returns according to IRS. Many of the adjustments included corrections to the:
- Earned Income Tax Credit
- Recovery Rebate Credit
- Additional Child Tax Credit
- American Opportunity Tax Credit
- Premium Tax Credit
- Advance Premium Tax Credit
If the taxpayer qualifies for the unemployment compensation exclusion but their account was not corrected by the IRS, they may need to file the amended 2020 tax return to claim the exclusion. Moreover, any applicable non-refundable or refundable credits are impacted by the exclusion.
Taxpayers should not file an amended return if they already submitted a return for the exclusion. For further information, including eligibility requirements, taxpayers should relay to the 2020 Unemployment Compensation Exclusion FAQs on IRS.gov. If they need to amend the tax year 2020 Forms 1040 and 1040-SR, taxpayers can file Form 1040-X, Amended U.S. Individual Income Tax Return, electronically with tax filing software.