Tax Refunds on 2020 Unemployment Benefits Due to Begin This Month

Job search.
Prostock-Studio / Getty Images/iStockphoto

If you’re due a refund from the IRS for receiving 2020 unemployment benefits when they were still taxable, your money could arrive soon.

See: Millions of Americans Reaching End of Their Unemployment ‘Benefit Year’ Could Face Gaps in Extending Payments
Find: Here’s a Full List of Unemployment Resources for Your State

Refunds on 2020 unemployment benefits are scheduled to start this month, CNBC reported on Monday. Single filers should be the first to receive them, while married couples and those with complicated returns will probably have to wait until summer.

Unemployment benefits are typically treated as taxable income on your federal tax return. But the $1.9 trillion American Rescue Plan, which President Joe Biden signed into law in mid-March, waived federal tax on up to $10,200 of unemployment benefits per person.

The problem is, many Americans who were eligible for the tax break had already filed their tax returns by the time Biden signed the bill and might have overpaid their taxes as a result.

Make Your Money Work

See: Are ‘Bridge Jobs’ a Good Idea to Cover Career Gaps?
Find: When Will You Get Your Tax Refund? Here’s When to Expect That Check

In late March, the IRS issued an announcement saying it would automatically refund the money in two phases — one during the spring and the other during the summer — to taxpayers who filed returns reporting unemployment compensation before the American Rescue Plan changes went into effect.

A lot of taxpayers are likely due a refund. CNBC, citing data from The Century Foundation, noted that around 40 million Americans received jobless benefits last year, with the average person getting $14,000.

The first phase of refunds will go to taxpayers who are eligible to exclude up to $10,200 of unemployment benefits from their federal taxable income. The second phase includes married couples who filed a joint tax return. These couples can waive taxes on up to $20,400 of benefits. The second phase also includes “others with more complex returns,” the IRS said.

See: What President Biden’s First 100 Days Have Meant for Your Wallet
Find: US Jobs Shifting to ‘Movers and Makers’ — 3 Hot Fields to Consider Today

Make Your Money Work

According to a separate IRS announcement, you can’t exclude unemployment compensation from taxation if your modified adjusted gross income is $150,000 or more. Also, if you file Form 1040-NR, you can’t exclude any unemployment compensation for your spouse.

You might need to file an amended tax return using Form 1040-X to get your full refund if the unemployment tax break makes you newly eligible for a tax deduction or credit such as the earned income tax credit.

Meanwhile, in some states that adopted the American Rescue Plan’s tax break on benefits, you’ll be required to file an amended state return to get the state-level refund.

More From GOBankingRates

About the Author

Vance Cariaga is a London-based writer, editor and journalist who previously held staff positions at Investor’s Business Daily, The Charlotte Business Journal and The Charlotte Observer. His work also appeared in Charlotte Magazine, Street & Smith’s Sports Business Journal and Business North Carolina magazine. He holds a B.A. in English from Appalachian State University and studied journalism at the University of South Carolina. His reporting earned awards from the North Carolina Press Association, the Green Eyeshade Awards and AlterNet. In addition to journalism, he has worked in banking, accounting and restaurant management. A native of North Carolina who also writes fiction, Vance’s short story, “Saint Christopher,” placed second in the 2019 Writer’s Digest Short Short Story Competition. Two of his short stories appear in With One Eye on the Cows, an anthology published by Ad Hoc Fiction in 2019. His debut novel, Voodoo Hideaway, was published in 2021 by Atmosphere Press.

Best Bank Accounts of July 2022

Untitled design (1)
Close popup The GBR Closer icon

Sending you timely financial stories that you can bank on.

Sign up for our daily newsletter for the latest financial news and trending topics.

Please enter an email.
Please enter a valid email address.
There was an unknown error. Please try again later.

For our full Privacy Policy, click here.