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For those of you who have lost your jobs to the COVID-19 Pandemic, We hope you have been able to take advantage of the unemployment benefits granted to you this past year. Now that tax season is here, you may have been wondering if all of those unemployment dollars were going to cost you a significant amount of money in taxes. We are here today to let you know that it will not! The IRS wrote a helpful article announcing that recipients of 2020 unemployment compensation will be excused from having to pay their unemployment taxes. Read the excerpt below to learn more!
“Normally, any unemployment compensation someone receives is taxable. However, a recent law change allows some recipients to not pay tax on some 2020 unemployment compensation.
The IRS will automatically refund money to eligible people who filed their tax return reporting unemployment compensation before the recent changes made by the American Rescue Plan. These refunds are expected to begin in May and continue into the summer.
Under the new law, taxpayers who earned less than $150,000 in modified adjusted gross income can exclude some unemployment compensation from their income. This means they don't have to pay tax on some of it. People who are married filing jointly can exclude up to $20,400 – up to $10,200 for each spouse who received unemployment compensation. All other eligible taxpayers can exclude up to $10,200 from their income.
Information for people who already filed their 2020 tax return
This law change occurred after some people filed their 2020 taxes. For taxpayers who already have filed and figured their 2020 tax based on the full amount of unemployment compensation, the IRS will determine the correct taxable amount of unemployment compensation. Any resulting overpayment of tax will be either refunded or applied to other taxes owed.”
To read the full article click this link.
For more information, or for help filing your 2020 taxes, please contact Handle It today at https://www.handle.it/contactustoday or give us a call at 833-202-7676.