Ever since President Biden signed the American Rescue Plan Act into law in March, there have been plenty of headlines about what the bill offers. The big news for many was that it included a third stimulus check, but there is much more in the relief package. It also allows eligible parents to receive monthly checks to help them with costs associated to having kids. Additionally, it provides financial aid to those struggling to pay their mortgages. But there is another way the Rescue Plan Act might send you money, and a lot of it.
Inside the bill is a tax refund that specifically excludes $10,200 in 2020 unemployment compensation from being taxable as a way to give those who struggled financially a break on their taxes. Due to effects of the pandemic on businesses across the country, millions of Americans were on unemployment last year, and many of them likely filed their taxes based on the entire amount of unemployment compensation they received, especially if they filed taxes before the bill passed. Now though, they might be getting a large check back to them and they don't have to do anything to receive it.
A press release from the IRS explained that "the IRS will determine the correct taxable amount of unemployment compensation and tax. Any resulting overpayment of tax will be either refunded or applied to other outstanding taxes owed."
It should be noted that the refund of up to $10,200 is only for households that reported an adjusted gross income of $150,000 or less in 2020. Also, the amount you get back depends on how much you needed to pay in taxes. Before sending anything back to you, the IRS might first apply it to what is owed. Refunds are already going out and will continue to throughout the summer so if the refund applies to you, you won't have to wait too long to see what you'll be getting.
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