When To Expect a Refund for Your $10,200 Unemployment Tax Break
If you claimed unemployment last year but filed your taxes before the new $10,200 unemployment tax break was announced, the IRS says you can expect an automatic refund starting in May, if you qualify. The tax waiver led to some confusion, given it was announced in the middle of tax season, prompting the IRS to offer additional guidance on how to claim it—even if filed your 2020 tax return before the provision passed into law.
How the tax break works
As part of COVID relief legislation, federal taxes for individual filers can be waived for up to $10,200 in unemployment income for the 2020 tax year, provided that you made $150,000 or less—that’s the make-it-or-break-it threshold with no phase out. In a weird wrinkle, the $150,000 income threshold remains the same for joint filers—although each filer is entitled to the tax break, which would then total $20,400 (per CNBC: if you and your spouse made more than $150,000 combined in 2020, you might want to file separately so you can both claim the waiver).
As unemployment benefits are normally considered taxable income, the IRS has also clarified that they won’t count unemployment income as part of their calculation for this tax credit. (That means that if you made $140,000 but received $10,001 in unemployment, you would still qualify for the tax break, whereas this would have not been the case if unemployment income was counted towards the total).
How to claim the benefit
According to CNBC, those who haven’t filed yet, or who filed after the new law went into effect, should have the tax waiver automatically factored into their returns (tax software companies like TurboTax and H&R Block have also updated their software to include the tax break). The IRS says that any overpayment of tax will be either refunded or applied to other outstanding taxes owed.
Therefore, the IRS says that people who filed early don’t need to file an amended return unless new taxable income exclusions make the taxpayer newly eligible for additional federal credits and deductions not already included on the original tax return (an adjusted income calculation might qualify you for the Earned Income Tax Credit, for example).
Note that this tax break only applies to federal taxes, and that some states will still tax your unemployment income—although some don’t (you can look up your state’s policy here).
When to expect a refund (if you qualify)
If you’re eligible for the waiver and it qualifies you for a refund, the IRS says you can expect to see a check in May—although more complicated or joint-filed tax returns will be processed later in summer (they don’t get more specific than that, unfortunately).
This story was originally published March 24, 2021 and was updated April 12, 2021 with updated information about when refund checks will be distributed.