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IRS to Redo Taxes on Unemployment

The Internal Revenue Service will automatically recalculate taxes on unemployment benefits in light of the American Rescue Plan. The agency will automatically refund money for those  who filed returns before the law was signed on March 11 and are eligible for such aid.

 

The IRS will determine the correct tax and taxable amount for those  who have already filed with any overpayment refunded or applied to taxes owed. The first refunds are expected in May

The legislation enables taxpayers who earned less than $150,000 in modified adjusted gross income in 2020 to exclude  unemployment compensation of up to $20,000 for those married and filing jointly and $10,200 for all other eligible taxpayers

The first  adjustment will be for those eligible for the exclusion for up to $10,000. It will then recalculate the amounts for married filing jointly individuals and those with more complex returns.

Those who have not filed can find information in two places. The first is the New Exclusion of up to $10,200 of Unemployment Compensation while others can find instruction and an updte worksheet at  IRS.gov/form1040.

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