The IRS has started reviewing 2020 income tax returns of eligible individuals who reported unemployment compensation, but did not claim the unemployment compensation exclusion provided by the American Rescue Plan Act. Individuals who paid taxes on unemployment compensation that should have been excluded from their income began receiving refunds the week of May 17.
For 2020, the ARP Act allows individuals to exclude from income up to $10,200 of unemployment compensation. For married individuals filing a joint return, this exclusion is up to $10,200 per spouse. However, taxpayers who, after the unemployment compensation exclusion is applied to their return, are now eligible for certain income-based tax credits not claimed on their original return (such as couples with qualifying children who, as a result of the exclusion, became eligible to claim the EITC) should file an amended tax return to claim those credits.
IRS will issue refunds when appropriate. After reviewing a return, the IRS will make any corrections related to the unemployment compensation exclusion automatically. The IRS will then issue any refunds resulting from its review of, and corrections to, a taxpayer’s 2020 return.
For 2020, the ARP Act allows individuals to exclude from income up to $10,200 of unemployment compensation. For married individuals filing a joint return, this exclusion is up to $10,200 per spouse. However, taxpayers who, after the unemployment compensation exclusion is applied to their return, are now eligible for certain income-based tax credits not claimed on their original return (such as couples with qualifying children who, as a result of the exclusion, became eligible to claim the EITC) should file an amended tax return to claim those credits.
IRS will issue refunds when appropriate. After reviewing a return, the IRS will make any corrections related to the unemployment compensation exclusion automatically. The IRS will then issue any refunds resulting from its review of, and corrections to, a taxpayer’s 2020 return.
