On March 11, 2021 the American Rescue Plan Act of 2021 was passed. This act excluded up to $10,200 per individual of unemployment compensation from taxation. If your 2020 tax return contained unemployment compensation and was either filed before March 11, 2021 or did not include the exclusion calculation the American Rescue Plan Act allows, you may be entitled to a refund.
The IRS has issued guidance stating that they will automatically correct tax returns by excluding up to $10,200 per individual of unemployment compensation and refunding any tax owed back to you. This refund will be sent to you in the same form as any other refunds you may have been sent this year. Thus, if you received a direct deposit refund, your unemployment compensation refund should also come as a direct deposit refund. If you did not receive a refund for anything else, you may just receive a refund check via USPS. Shortly after receiving your refunded money, you should receive a letter via USPS stating the purpose and explanation for your refund.
Since the IRS is only refunding taxes based solely on excluding unemployment compensation, your refund may not be accurate. Thus, you can provide your refund explanation letter to us so we may review your return and ensure you are receiving the full refund you are entitled to. If you qualify for an additional refund amount, we will assist you with amending your original return.
The IRS has specifically asked that amendments not be filed for unemployment compensation exclusion until they have issued a corrected refund. Thus, we will not be able to complete a review of your return for unemployment compensation reasons until we have seen your corrected refund explanation letter. Once you receive your letter, please provide it to our office via drop-off, USPS, or email. We will contact you once we have finished our review.
If you have any questions, please call our office Monday, Tuesday, and Thursday during the hours of 9:00am – 4:00pm.