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An estimated 40 million Americans collected a combined $580 billion in unemployment insurance benefits in last year, according to a report by The Century Foundation.
In most years, those who filed for unemployment would have paid income taxes on that money. But thanks to a provision in the American Rescue Plan Act, the first $10,200 of 2020 unemployment benefits for individual taxpayers will be waived (double that to $20,400, if you’re married filing jointly and both people filed for unemployment insurance last year).
Since the American Rescue Plan was signed by President Biden after many Americans already filed taxes, the Internal Revenue Service released a statement in March asking taxpayers to hold off on amending their returns while they implemented the new program.
Now, the agency’s website informs taxpayers to expect refunds on their unemployment taxes beginning this May for anyone who filed before the waiver was established and therefore overpaid on their taxes or received a smaller refund than they were owed.
The refunds will happen in two waves:
- Taxpayers eligible for the up to $10,200 exclusion who have already filed 2020 taxes claiming their unemployment insurance benefits
- Married filing jointly taxpayers who are eligible for the up to $20,400 exclusion, and others with more complex returns
The first refunds are expected to begin in May and will continue into the summer. There’s no need to file an amended return unless you need to claim additional credits not included in this tax exclusion waiver.
The IRS has worked with the tax return preparation software industry to reflect these updates so people who choose to file electronically simply need to respond to the related questions when electronically preparing their tax returns.
Taxes are due on May 17, 2021. To make the process easier, consider filing your taxes with an online tax filing program. There are a bunch of different options to choose from, and many offer upgraded plans with live tax experts, who can help you tackle confusing questions if your taxes are more complicated this year.
While it’s not ideal to wait for the federal government to send you a check, use the time between now and May to look at your budget to come up with the best plan to use this anticipated windfall. Some experts suggest planning to save 80% — if you don’t need it for the basics — and spending 20% on something fun. And if the 80/20 windfall rule doesn’t work for your budget, learn how giving your money a purpose well ahead of time can help you make your savings…
Go to the news source: When You Will Get It if You Filed Taxes Early?