Earlier this month, the Internal Revenue Service said a recent law change allows certain people to not pay tax on some 2020 unemployment compensation.
Under the new law, according to the IRS, taxpayers who earned less than $150,000 in modified adjusted gross income can exclude some unemployment compensation from their income, meaning they don’t have to pay tax on it.
Here who is eligible:
- People who are married filing jointly can exclude up to $20,400 – up to $10,200 for each spouse who received unemployment compensation.
- All other eligible taxpayers can exclude up to $10,200 from their income.
Those who are eligible and filed their tax return before the recent changes made by the American Rescue Plan will get refunds; those will begin going out in May and continue into the summer.
For those who already filed and figured their 2020 tax based on the full amount of unemployment compensation, the IRS said it will determine the correct taxable amount. Any overpayment will either be refunded or applied to other taxes owed, according to a news release.