Some taxpayers are about to receive yet another new stimulus benfit, depending on their personal financial situation and how recently they filed their 2020 federal tax return.
This is not new a stimulus check, though it was made possible by the $1.9 trillion stimulus-heavy legislative package that President Biden signed back in March which funded a continuation of the $1,200, $600, and $1,400 stimulus checks that were earmarked as prerequisite-free direct payments for taxpayers. In this new case, the surprise stimulus benefit we noted above is a tax refund stemming from the $1.9 trillion stimulus bill, which excludes up to $10,200 in unemployment compensation from being taxable for 2020. Given the extraordinary nature of the pandemic year of 2020, the thinking behind including this benefit in the legislation was that people should get a break on jobless income being taxable, like it normally is. And so, the IRS is giving back a portion of what the tax agency might have collected from you via refunds this spring and summer.
One thing that’s great about these new payments is that a news release from the IRS states that taxpayers don’t need to take any steps on their own for this recalculation to occur, and the first refunds are expected to come in May before continuing through the rest of the summer.
“For those taxpayers who already have filed and figured their tax based on the full amount of unemployment compensation, the IRS will determine the correct taxable amount of unemployment compensation and tax,” an IRS news release explains. “Any resulting overpayment of tax will be either refunded or applied to other outstanding taxes owed.
“For those who have already filed, the IRS will do these recalculations in two phases, starting with those taxpayers eligible for the up to $10,200 exclusion. The IRS will then adjust returns for those married filing jointly taxpayers who are eligible for the up to $20,400 exclusion and others with more complex returns.”
Some important points to note here: If you lost your job at some point in 2020, not for the entire year, that would suggest you also have normal job-related income to report for 2020. And, accordingly, this refund of up to $10,200 is for households that report an adjusted gross income of no more than $150,000 for the year. By the IRS’ calculations, more than 10 million taxpayers are included in this bucket, and so those are the people whose returns the IRS is adjusting automatically. No action is required on the part of the individual taxpayer.
Furthermore, it’s also important to remember — this action on the part of the IRS could result in a tax refund, but you might have other aspects of your situation that negate this refund. In other words, unlike the guarantee associated with the $1,400 stimulus checks, this unemployment compensation-related refund might result in a tax refund, but it also might result in simply reducing the amount of taxes you owe, or even no change at all to your tax return.