WASHINGTON — The Internal Revenue Service has announced that, beginning in May, it will automatically refund federal income tax over-payments related to reporting of unemployment benefits.
Under the American Rescue Plan, unemployment benefits of up to $10,200 are not taxable for individuals who earned less than $150,000 in modified adjusted gross income; $20,400 for married couples who file jointly.
No action by the taxpayer is needed, over-payments will either be refunded or applied to any outstanding tax debts.
The IRS will initially process returns for taxpayers eligible for the $10,200 exemption, then those with the $20,400 exemption and more complex returns, according to a press release.
Taxpayers do not need to file an amended return unless the exemption makes them eligible or additional tax deductions or credits, such as the Earned Income Tax Credit, that were not on their original filing.
For more information, see the IRS publication “New Exclusion of up to $10,200 of Unemployment Compensation” at www.irs.gov.