Unemployment benefits: How and why you could get a $10,200 tax break from the IRS


Sarah Tew/CNET

If you received unemployment benefits in 2020 — and paid taxes on those benefits — you may be due extra money from the IRS as a refund. The American Rescue Plan — passed in March — included a $10,200 tax exemption that gives you a tax break on the unemployment benefits you received. With the stimulus bill,  you also get more weeks of the $300 bonus payments, athird stimulus check and expand child tax credit payments if you qualify. 

The IRS said it will automatically refund money to eligible people who had already filed their tax return before the unemployment tax break changes went into effect. 

In 2020, 23 million Americans filed for unemployment due to the coronavirus pandemic, according to the Bureau of Labor Statistics. Under the Pandemic Unemployment Assistance created under the CARES Act in March 2020, this included those who were laid off as well as gig workers, contractors and self-employed people who don’t normally qualify for unemployment insurance. Here’s what we know about the unemployment tax refund right now, and the details we’re still waiting to learn. 

What to know about the unemployment tax refund from the IRS

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What we still don’t know about the unemployment tax break

“This new clarification from the IRS is good news for the millions of taxpayers impacted, but may still be confusing,” said Mark Steber, chief tax officer for Jackson Hewitt. “Some taxpayers may have questions as to the timing of any payment and whether it will come in a check or other form. The IRS is still providing clarification on these and other questions related to the just announced program. Once taxpayers receive their automatic payments in the coming weeks and months it may be a good idea to check in with a trusted tax pro to make sure the IRS computed their amount correctly.”

For more details, here are seven ways to get more money back on your 2020 tax return, everything about the child tax credit for up to $3,600 per child and what to know about the new May 17 tax deadline.

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source: cnet.com