The Internal Revenue Service announced recently that they will start to refund qualified Americans for a new tax break on their 2020 unemployment benefits.
IRS To Issue Tax Refund
The IRS said that Americans who qualify for a new tax break on their 2020 unemployment benefits will automatically receive an automatic refund in May, according to a recently published article in Fox News.
The American Rescue Plan worth $1.9 trillion that Pres. Joe Biden signed into law last March waives federal income taxes up to $10,200. This also includes those who earn $150,000 a year for individuals.
However, not all states embrace the new Tax Refund of the IRS. Some states seek to amend the tax returns and many will not automatically recalculate taxes, according to a published article in CNBC News.
Who Are Eligible For the Tax Refund?
According to Yahoo News, individuals who earned $140,000 last year and collected also $10,200 jobless benefits are still eligible for the Tax Refund. It is important to take note to exclude the jobless aid when calculating their modified adjusted gross income.
Additionally, single or married filers who earned less than $150,000 are also eligible to take advantage of the tax break. This means that each spouse can exclude an amount of $10,200 and a total amount of $20,400 for those who jointly filed to qualify in the Tax Break.
However, the IRS also clarified that any amount that is more than $10,200 for individuals is still taxable. Meanwhile, it is also important to take note that the break applies to this tax filing that began Feb. 12 and will end on May 17.
How Will the Agency Recalculate the Tax Refund?
The IRS said that they will do the recalculation in two phases. First, the agency will begin with individual taxpayers who are eligible for a $10,200 exclusion. Second, they will calculate the new refund for married couples for the $20,400 exclusion and other complex returns.
The agency said in their official statement "There is no need for taxpayers to 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."
Some States Seek To Amend Tax Break
Some states are now seeking to amend the $10,200 and $20,400 tax break. To claim a rebate, some states require employees who claimed a federal tax exemption on unemployment insurance to file an amended tax return.
The federal government and the majority of states consider unemployment payments, and all additional funds allocated by federal relief services, to be taxable revenue. Taxes are not immediately deducted from jobless benefits since they are from a regular paycheck. Many receiving unemployment benefits must sign in to have their taxes withheld.
According to the latest data from tax preparer H&R Block, 13 states will not provide the benefit to unemployed Americans and these are Colorado, Georgia, Hawaii, Idaho, Kentucky, Massachusetts, Minnesota, Mississippi, North Carolina, New York, Rhode Island, South Carolina, and West Virginia are among the states.