Taxpayers who received unemployment benefits last year but filed their tax returns before a new tax break became available could receive an automatic refund as early as May, the Internal Revenue Service said on Wednesday.
The latest coronavirus relief legislation, signed on March 11 in the middle of the tax season, made the first $ 10,200 of unemployment benefits tax-free in 2020 for people with modified adjusted income less than $ 150,000. (Married taxpayers filing together can exclude up to $ 20,400.)
However, some Americans had filed their tax returns back in March and waited for official guidance from the agency. Millions of U.S. workers registered unemployment last year, but the IRS said it is still determining how many workers affected by the tax change had already filed their tax returns.
On Wednesday, the IRS confirmed it would automatically recalculate the correct amount of taxable benefits – and any overpayment will be refunded or applied to any other outstanding taxes. The first refunds are expected to be made in May and will continue into the summer.
The IRS said it would start processing the simpler returns first, or those eligible for excluded benefits up to $ 10,200, and then move on to returns for joint claimants and others with more complex returns.
It is not necessary for those affected to file an amended tax return unless the calculations make the taxpayer eligible for additional federal credits and deductions that are not already included in the original tax return, the agency said. These taxpayers may also want to review their state tax returns, the IRS said.
People who have not yet submitted and expect to do so electronically can simply answer the questions from their online tax advisor, which will take the new tax break into account when submitting. The agency provided an updated worksheet and additional guidance in March for taxpayers who prefer paper.