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UNEMPLOYMENT TAX EXEMPTION

REFUND FOR THE $10,200 UNEMPLOYMENT TAX EXEMPTION

The IRS announced that it will issue a second round of refunds in mid-month to cover the tax exemption contained in a plan called the “American Rescue Plan” (unemployment tax exemption).

This refund under the exemption is $10,200 and may reach millions of Americans in the coming days as part of another effort to issue a recent round of payments.

In a June 4 proclamation, the agency said it will send out another round of refunds under the tax exclusion contained in the President’s Administration’s “American Recovery Plan” in the middle of this month.

Of 13 million Americans eligible for the exemption, more than 3.1 million of those returns have been reviewed so far and approximately 2.8 million refunds have been sent out.

Refunds have not been granted in all cases because, due to outstanding debts owed by the individual, the refund may be garnished.

 

THE PROCESS OF SENDING THE REFUNDS WILL BE EXTENDED UNTIL THE END OF THE SUMMER .

The process began in mid-May with the simpler returns and will be extended until late summer to evaluate the more complex documentation including those making dependent claims and tax credits.

The next set of refunds is scheduled to be mailed in mid-June. The review and processing of corrections will continue through the summer as the simpler returns continue to be reviewed and then move on to the more complicated ones. The above is information provided by the Tax Collector’s office.

IN CERTAIN CASES, INDIVIDUALS WILL BE REQUIRED TO FILE AN AMENDED TAX RETURN WITH THE IRS.

Those with qualifying children who are entitled to the EITC after the exclusion is calculated must file a corrected return in order to claim the new benefits. The IRS may adjust tax returns for those who are single with no children but are eligible for the EITC.  It may also adjust tax returns on which the EITC has been claimed and qualified children identified.

 

THE MAXIMUM AMOUNT THAT CAN BE EXCLUDED IS €10,200.

The Plan excluded up to $10,200 of unemployment compensation in 2020 per taxpayer. This $10,200 is the maximum amount can be excluded when calculating taxable income; this is not the amount of refunds.

MARRIED COUPLES CAN EXCLUDE UP TO $20,400.

You will be eligible to exclude unemployment compensation if you received it in 2020 and your modified adjusted gross income is less than $150,000. The modified AGI to qualify for such an exclusion is your 2020 adjusted gross income minus the total unemployment compensation you received. It remains the same limit for all tax states, whether you are married or not and also if you file a joint tax return. 

If you and your spouse file a joint return and your joint amended AGI is less than $150,000, you can exclude up to $10,200 of your unemployment compensation and up to $10,200 of your spouse’s unemployment compensation.