Where you enter your unemployment compensation on your Schedule 1. This image is for informational purposes only.
If You Filed Your Taxes Already, the IRS Won’t Require You to File An Amended Tax Return In Most Cases
Since we are in the middle of tax season, you may have already filed
and claimed your full unemployment benefits on your tax return.
According to the IRS
, more than 23 million Americans filed for unemployment last year. On March 31, the IRS announced taxpayers who have already filed would not have to resubmit their tax returns in most cases; the IRS will adjust qualifying returns automatically in two phases.
The IRS will start with single taxpayers who qualify for the tax break and then process taxpayers who filed jointly. It estimates that taxpayers will begin to receive tax refunds as early as May, and the agency will continue to process refunds through the summer. If you owe taxes, the IRS will apply any adjustment to outstanding taxes due.
However, if you expect your tax return adjustment makes you eligible for a tax credit
or an increase of a tax credit previously claimed, you will need to file an amended tax return to claim the credit.
For example, let’s say, for instance, you qualify for the Earned Income Tax Credit (EITC)
. However, because of the unemployment tax break, your income has changed and you may now be eligible for a higher credit. In this instance, the IRS requests you to file an amended tax return to claim the increase or any other credit you may now be entitled to due to the reduction of income.
The best way to determine if you qualify for a new tax credit is to speak with a tax professional or if you previously used an online tax software program
, run your taxes through the program again (depending on things like your income, this may incur a fee.). While the IRS will automatically make adjustments to your federal tax return if you qualify for the tax break, your state tax return will not be adjusted. You should also contact your state tax agency’s website or do your best to contact them by phone to determine if any additional steps are necessary to claim the tax break. If you are unable to speak with someone, consider hiring a tax professional for assistance.
The Unemployment Tax Waiver Could Save You Thousands of Dollars
This tax break could provide a tax savings of thousands of dollars depending on your tax situation.
“With current individual tax rates ranging from 10% to 37%, the potential tax savings can vary from $1,020 to $3,825,” Johnson says. The amount, of course, depends on the taxpayer’s filing status, income and other factors, such as deductions claimed on the tax return.
For example, if you qualify for the $10,200 tax break, you’re single and are in the 22% tax bracket, you may qualify for a tax savings of $2,244. And if you are married and both you and your spouse qualify for the tax break, you may be able to save $4,488.
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