Good news for those of you who collected pandemic unemployment last year and already filed your 2020 taxes. You might be getting a refund!
The American Rescue Plan Act enacted in March made unemployment benefits up to certain thresholds tax free. The IRS recently announced beginning in May it will begin issuing automatic refunds for taxes paid on those benefits and expects to continue issuing those refunds throughout the summer.
If you reported a modified adjusted gross income of less than $150,000 on your tax return you can expect a refund for taxes paid on up to $10,200 of your individual 2020 unemployment compensation or up to $20,400 if married filing jointly if both you and your spouse received unemployment benefits.
The IRS is not requiring you to file an amended return but does suggest you review your calculations since the reduction in your modified adjusted gross income may make you eligible for additional federal credits and deductions. Review your state return as well. Arizona currently requires you pay tax on all unemployment compensation.
For more information on American Rescue Plan Act changes which could impact your 2020 tax return, check out The new stimulus act – What’s in it for you? You’ll find changes not only to unemployment benefits but the Child Tax Credit, Child and Dependent Care Credit, Employee Retention Credit and more.