IRS Unemployment Refund

The latest tax changes weren’t up to date with the start of the tax season. In particular with the unemployment compensation exclusion. When this tax change came into effect, the tax season had already started. Taxpayers that were eligible for this tax exclusion but had already filed their returns couldn’t get the exclusion on their returns. If you didn’t claim the exclusion on your return but were eligible for this, there is no need to worry. The Internal Revenue Service will adjust your return and you’ll get your refund or get your tax liability reduced. Taxpayers that expect a refund will have an increase on their refunds as they won’t have to pay up to $10,200 in taxable income

When will I get my unemployment refund?

There are two outcomes for when you’re going to get your unemployment refund. If you had already received your tax refund without the changes accounting on your return for the unemployment compensation exclusion, you won’t get a separate refund than the one you already received.

Taxpayers that haven’t got their refunds, though, won’t need to do anything extra. You will get your refund normally as you would. 

You can always track the status of your refund by using the Where’s My Refund service of the IRS regardless of the unemployment compensation exclusion. 

Who is eligible for the unemployment compensation exclusion?

Throughout 2020, many people received unemployment compensation as we were experiencing businesses shutting down left and right due to the pandemic. The increased number of people experiencing a drop in their incomes made the IRS to this from taxes. 

Anyone regardless of their filing status with a modified adjusted gross income of $150,000 can benefit from this exclusion. Your modified adjusted gross income is not to be mistaken with adjusted gross income. It’s completely different than modified adjusted gross income but very similar. Learn more about modified adjusted gross income.

 Amending returns for the unemployment exclusion

Taxpayers that already received their refunds will need to amend their returns to claim the unemployment compensation exclusion. Since the number of taxpayers that have already received their refunds is very low as the changes were announced about a week into the start of the tax season, it shouldn’t affect a large portion of them. However, those that have been affected by this change need to amend their returns using Form 1040-X for the 2021 tax season and mail them to the IRS with the exclusion claimed. 

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