Were you among those who filed your 2020 tax return early so that you could maximize a much needed refund to put in motion right away?
Well, the recently passed American Rescue Plan includes a tax break on unemployment compensation that you may have technically missed – depending upon when you filed your taxes. NOT TO WORRY! – The IRS has already provided communication informing us of how the $10,200 exclusion will be handled for early filers.
The American Rescue Plan – just passed on March 11, 2021 – included a taxable income exclusion of the first $10,200 of unemployment compensation received, for those with 2020 AGI (Adjusted Gross Income) below $150,000. However, due to the final Plan passing after the 2020 tax season had already begun, early filers who wanted to maximize their third stimulus by filing 2020 tax returns (which for many reflected significantly lower income than 2019) may not have yet received the $10,200 tax break that was included in the final Plan.
Tax preparation software companies have reported updates at various times over the past few weeks to incorporate the tax law change, so be sure to check with your tax advisor to determine whether or not you qualify for the tax break, and whether or not the exclusion was actually applied to your 2020 return; if you qualify and the exclusion was not applied to your return, the IRS has released guidance that indicates that an amended return is NOT necessary.
IRS Commissioner Charles Retting recently stated, “Do not file an amended return at this time. We believe that we will be able to handle this on our own. We believe that we will be able to automatically issue refunds associated with the $10,200” (watch the communication from the March 18, 2021 Ways & Means Committee hearing here).
Click here to read more and for instructions on completing the Unemployment Compensation Exclusion Worksheet, if you have not yet filed. Further communication is expected to be released by the IRS soon. And remember, if you prefer to wait a little longer for things to be sorted out a bit more, the tax filing deadline has been extended to May 17th for individuals.
I’ll definitely provide an update on this topic as more information becomes available, so be sure to check back here often and subscribe to Shelly’s Frugality Podcast on Youtube to receive information not featured here 😉!
Stay encouraged ❤️!
Shelly
Disclaimer: This information is provided for general information purposes only and do does not constitute nor is to be construed as tax or financial advice. Please consult with an accountant or financial advisor for advice suitable for your personal situation.