IRS PROVIDES INFORMATION ON 2020 UNEMPLOYMENT BENEFITS
The IRS has provided the following information regarding 2020 unemployment benefits and the 2021 tax filing season:
Unemployment benefits
A record number of Americans applied for unemployment compensation in 2020 due to the pandemic. Anyone who received unemployment benefits will need to report it on their tax returns.
However, the American Rescue Plan, enacted on March 11, 2021, excludes from income up to $10,200 ($20,400 if married filing jointly) of unemployment compensation received in 2020 for taxpayers with modified adjusted gross income under qualifying thresholds. Any amount over $10,200 is still taxable for each person. To determine if payments received for being unemployed are taxable, see the Interactive Tax Assistant on IRS.gov.
For those who have already filed their 2020 tax return and paid taxes on the full amount of unemployment compensation before the law was passed, they should not file an amended return. The IRS will automatically refund money to people who already filed their tax return reporting unemployment compensation.
The IRS will recompute any credits and deductions claimed on the original return. However, if the reduction of income now qualifies a taxpayer for a new credit not claimed on the original return, like the Earned Income Tax Credit (EITC), those taxpayers will need to file an amended tax return, Form 1040x, to claim the new credit. Taxpayers can see if they qualify for the EITC at IRS.gov.
Unemployment benefit recipients should have received a Form 1099-G, Certain Government Payments, from the agency paying the benefits. The form will show the amount of unemployment compensation they received in 2020 in Box 1, and any federal income tax withheld in Box 4.
Some states do not mail Form 1099-Gs. Taxpayers may need to get the electronic version from their state’s website.
Taxpayers who received an incorrect Form 1099-G for unemployment benefits they did not receive should contact the issuing state agency to request a revised Form 1099-G showing they did not receive these benefits.
Taxpayers who are unable to obtain a timely, corrected form from their state should still file an accurate tax return, reporting only the income they received. A corrected Form 1099-G showing zero unemployment benefits in cases of identity theft will help taxpayers avoid an unexpected federal tax bill for unreported income.
Additionally, if taxpayers are concerned that their personal information has been stolen and they want to protect their identity when filing their federal tax return, they can request an Identity Protection Pin (IP PIN) from the IRS.
Generally, by law, unemployment compensation must be included as income. Taxable benefits include any of the special unemployment compensation authorized under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, enacted in 2020.
If a taxpayer didn’t report income from gig work or unemployment compensation on a return, a corrected return can be filed using Form 1040-X, Amended U.S. Individual Income Tax Return. Form 1040-X can be filed electronically.
Taxpayers who owe but can’t pay in full always have options to seek help through payment plans and other tools from IRS.gov/payments.
If you are having difficulty viewing this message, click here to view the mobile web version.
IRS PROVIDES INFORMATION ON 2020 UNEMPLOYMENT BENEFITS
Mary:
The IRS has provided the following information regarding 2020 unemployment benefits and the 2021 tax filing season:
Unemployment benefits
A record number of Americans applied for unemployment compensation in 2020 due to the pandemic. Anyone who received unemployment benefits will need to report it on their tax returns.
However, the American Rescue Plan, enacted on March 11, 2021, excludes from income up to $10,200 ($20,400 if married filing jointly) of unemployment compensation received in 2020 for taxpayers with modified adjusted gross income under qualifying thresholds. Any amount over $10,200 is still taxable for each person. To determine if payments received for being unemployed are taxable, see the Interactive Tax Assistant on IRS.gov.
For those who have already filed their 2020 tax return and paid taxes on the full amount of unemployment compensation before the law was passed, they should not file an amended return. The IRS will automatically refund money to people who already filed their tax return reporting unemployment compensation.
The IRS will recompute any credits and deductions claimed on the original return. However, if the reduction of income now qualifies a taxpayer for a new credit not claimed on the original return, like the Earned Income Tax Credit (EITC), those taxpayers will need to file an amended tax return, Form 1040x, to claim the new credit. Taxpayers can see if they qualify for the EITC at IRS.gov.
Unemployment benefit recipients should have received a Form 1099-G, Certain Government Payments, from the agency paying the benefits. The form will show the amount of unemployment compensation they received in 2020 in Box 1, and any federal income tax withheld in Box 4.
Some states do not mail Form 1099-Gs. Taxpayers may need to get the electronic version from their state’s website.
Taxpayers who received an incorrect Form 1099-G for unemployment benefits they did not receive should contact the issuing state agency to request a revised Form 1099-G showing they did not receive these benefits.
Taxpayers who are unable to obtain a timely, corrected form from their state should still file an accurate tax return, reporting only the income they received. A corrected Form 1099-G showing zero unemployment benefits in cases of identity theft will help taxpayers avoid an unexpected federal tax bill for unreported income.
Additionally, if taxpayers are concerned that their personal information has been stolen and they want to protect their identity when filing their federal tax return, they can request an Identity Protection Pin (IP PIN) from the IRS.
Generally, by law, unemployment compensation must be included as income. Taxable benefits include any of the special unemployment compensation authorized under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, enacted in 2020.
If a taxpayer didn’t report income from gig work or unemployment compensation on a return, a corrected return can be filed using Form 1040-X, Amended U.S. Individual Income Tax Return. Form 1040-X can be filed electronically.
Taxpayers who owe but can’t pay in full always have options to seek help through payment plans and other tools from IRS.gov/payments.
Of course if you have questions or need to file your taxes, contact our office by emailing support@mtaustinandassoc.com
Many Happy Returns!
Listen to the podcast of my interview with C Thomas Gambrell II of Birth A New Business where I share my secret to sustaining a home based business as a single parent! Click below to hear it. I’d love your comments and feedback. Did you hear something that was useful to you as an entrepreneur? ⤵️
Do yourself a favor – if you don’t have a personal shredder, purchase one. There are a number low cost shredders made for home use that range from $15-$75 ; the lower priced shredders are made to sit on top of a small wastebasket. Mail theft is still common, especially during the end of the year when tax documents and year end banking and investment statements are often mailed to clients. Shredding your documents with personal and financial information instead of throwing them in the trash will lower your chance of being a victim of identity theft and fraud.
Insurance companies and doctor’s offices are not immune to making human mistakes yet most people don’t bother to look at the statements from their insurer before they pay the balance due or quickly file away the invoice when no payment is due.
Most banks make it easy for you to view your daily activity and pending transactions through an app on your phone. If you do not have access to an app, you should have the ability to log into your online banking account to view the current activity. You should also be able to download a copy of your last bank statement. If you still receive your bank statements in the mail, we strongly suggest you contact your bank’s customer service department and request “paper free” or digital downloads of your monthly bank statements. Most banks will now charge to mail paper statements and this would be an opportunity to both save on the banking fee and lessen the chance of your sensitive information being taken from the mail.