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IRS processes returns of taxpayers who paid tax on 2020 unemployment comp

June 8, 2021/in Uncategorized/by Stephanie Hendon

In a June 4, 2021 News Release, the IRS announced that it has begun processing returns of taxpayers who paid tax on their 2020 unemployment compensation that, as a result of 2021 legislation, was not taxable.

Background-2020 unemployment compensation exclusion. The American Rescue Plan Act of 2021 (ARP Plan or ARPA) provides that, for taxpayers whose 2020 modified adjusted gross income is less than $150,000, the first $10,200 of unemployment compensation received in 2020 is not included in the taxpayer’s 2020 gross income. In the case of a joint return, the first $10,200 per spouse is not included in gross income. (Code Sec. 85(c)(1))

In IR 2021-71, the IRS announced that, for those taxpayers who had already filed their 2020 return and figured their 2020 tax based on the full amount of unemployment compensation received in 2020, IRS would determine the correct taxable amount of unemployment compensation and tax. Any resulting overpayment of tax would be either refunded or applied to other outstanding taxes owed.

IRS has begun processing the returns. IRS has announced that it is processing these 2020 returns and that, during the week of June 4, 2021, it sent more than 2.8 million refunds to filers of these returns.

IRS also noted:

  • So far, the IRS has identified 13 million taxpayers that may be eligible for the adjustment that resulted from the ARPA provision.
  • The IRS is also making corrections for the Earned Income Tax Credit (EITC), Premium Tax Credit and Recovery Rebate Credit affected by the exclusion.
  • Taxpayers who have qualifying children and who become eligible for EITC after the exclusion is calculated may have to file an amended return to claim any new benefits. The IRS can adjust tax returns for those who are single with no children and who become eligible for EITC. They can also adjust tax returns where EITC was claimed and qualifying children identified.
  • They plan to issue the next set of refunds in mid-June. The review of returns and processing corrections will continue during the summer as the IRS continues to review the simplest returns and then turns to more complex returns.
  • Taxpayers will receive letters from the IRS, generally within 30 days of the adjustment, informing them of what kind of adjustment was made (such as refund, payment of IRS debt payment, or payment offset for other authorized debts) and the amount of the adjustment.

 

© 2021 Thomson Reuters/Tax & Accounting. All Rights Reserved.

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https://www.hscompanies.com/wp-content/uploads/2021/06/2020-Unemployment-Returns-Processed_060821.jpg 360 480 Stephanie Hendon https://www.hscompanies.com/wp-content/uploads/2017/11/HS-logo-edit.png Stephanie Hendon2021-06-08 12:25:382021-06-08 12:25:38IRS processes returns of taxpayers who paid tax on 2020 unemployment comp

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