It’s really about working with a tax expert or a software provider that can help you understand it so that you don’t create more problems for yourself. “If you amend your state return, you may be in a situation where you should have amended your federal return as well,” says Phillips. Taxpayers also need to make sure that the IRS or their state won’t amend their returns for them first. Should I amend my return?įor now, taxpayers should wait until further guidance is provided from the IRS before they amend their federal and state returns so that they don’t inadvertently delay the agency’s process, tax experts advise. Others may qualify for the American Opportunity Tax Credit, which is a credit for qualified education expenses paid for an eligible student for the first four years of higher education. These taxpayers should review their state returns as well, tax experts say.
Taxpayers, however, would have to file an amended return if they didn't originally claim the EITC or other credits but now are eligible because the exclusion changed their income. The tax agency recently issued about 430,000 more refunds averaging about 1,189 each. Because the exclusion changed the income level, those people may now be eligible for an increase in the EITC amount which may result in a larger refund. Since May, the IRS has been sending tax refunds to Americans who filed their 2020 return and reported unemployment compensation before tax law changes were made by the American Rescue Plan. You can also request a copy of your transcript by mail or through the IRS automated phone service by calling 1-80. The IRS, for instance, can adjust returns for taxpayers who claimed the EITC. If those tools dont provide information on the status of your unemployment tax refund, another way to see if the IRS processed your refund is by viewing your tax records online. The IRS has stressed that taxpayers shouldn’t file an amended return unless the calculations make the taxpayer newly eligible for additional federal credits and deductions not already included on the original tax return. Those taxpayers may need to add back their unemployment compensation to their income on their state returns.īut few taxpayers would need to do that because tax software providers in most cases wouldn’t have allowed an exclusion at the state level until the state issued guidance, according to Andy Phillips, Director of the Tax Institute at H&R Block.īut for those people who filed their returns by paper in a state where no exclusion is available and excluded their unemployment income, they would need to amend their return and add back any income, he added. Taxpayers who filed a tax return in these states after the legislation passed may have excluded jobless benefits from their state and federal returns. Three states, including Indiana, Massachusetts and Wisconsin, offer a partial tax break on unemployment benefits. They are: Colorado, Georgia, Hawaii, Idaho, Kentucky, Minnesota, Mississippi, North Carolina, New York, Rhode Island and South Carolina. Which states aren’t offering the tax break?Įleven states aren’t offering the unemployment tax break, according to tax preparation service H&R Block. New Mexico, for instance, has advised taxpayers to amend their returns if they were filed before mid-March. This varies by state. Taxpayers who filed their returns before the American Rescue Plan became law in March may need to file an amended state tax return to get a state refund. “While many states will follow suit and automatically refund taxpayers, there are a handful of states that are requiring taxpayers to file an amended tax return to receive the benefit of the unemployment tax break if they filed before the American Rescue Plan was signed,” says Curtis Campbell, president of TaxAct, a tax preparation software. While it has already sent millions of checks, the IRS states that it will continue to do so through the end of the summer.Otherwise, the IRS said it will recalculate returns of taxpayers by incorporating the $10,200 exclusion and either refund them or apply it to other taxes they owe. It began issuing automatic tax refunds to eligible unemployment recipients in May. Many taxpayers were worried that they would miss out on new unemployment benefits if they had filed early, but as promised, the IRS has automatically adjusted taxpayers’ incomes from last year and taken into account how it would affect their eligibility for benefits after March 2020, when the bill became law. See: Hourly Wages Are Going Up But More Needs to Be Done to Bring Workers Backįind: Almost 3 Million Signatures on Petition for 4th Round of Stimulus Checks If you received unemployment benefits last year and filed your 2020 tax return early, you might not have received the unemployment benefits that are now available to you as a result of the coronavirus stimulus relief bill. The IRS is starting to send out unemployment benefits to those who filed their taxes last year before the American Rescue Plan was signed into law. If you do not receive your Form 1099-G by February 1, and you received unemployment benefits during the prior calendar year, you may request a duplicate 1099-G form by phone: Call Tele-Serv at 80.