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Unemployment Tax Refund - What You Need to Know and How to Get Yours

Unemployment tax refund refers to the tax exclusion recently set by the Internal Revenue Service or IRS for citizens who received unemployment benefits. The refund is due to the citizens’ overpayment of benefits tax after the IRS added a tax exemption for the first 10,200 US dollars of unemployment benefits.

Based on recent calculations, the refund resulted in a total of 510 million US dollars. In fact, during the first week of November, IRS sent a total of 430,000 tax refunds to qualified taxpayers.

Unemployment Compensation Exemption

Just this March, the American Rescue Plan set a 10,200 US dollars tax exemption on unemployment benefits received in the year 2020. For married couples who file their taxes jointly, the tax exemption is a total of 20,400 US dollars.

Since there are citizens who filed their tax returns earlier than the time that the law was enacted, the IRS is reviewing about 10 million tax return records that were filed before March to determine citizens who may qualify for a refund or reduced tax bill.

If you are one of those who received unemployment benefits within the year 2020, you can check if the unemployment benefits you received are taxable by using the Interactive Assistant Tool of the IRS.

Qualified Taxpayers

To be qualified for tax exemption of about 10,200 US dollars, one must have a Modified Adjusted Gross Income or MAGI of 150,000 US dollars or less. If you are married and file your taxes jointly, the amount of tax exemption you will receive individually will be the same amount of exemption for individual taxpayers.

You are not qualified for the tax exemption if:

  • You acquired a Modified Adjusted Gross Income that is higher than 150 US dollars; or
  • You filed a 1040-NR form (this means that you cannot get the tax exemption for your spouse).

Claiming Schedule

The first week of November is the latest release of refunds issued to qualified taxpayers. To sum it up, there are already about 11.7 million issued tax refunds.

Although, the IRS is currently reviewing tax return records by batch prioritizing the least complicated documents first such as individual taxpayers without dependents followed by married couples with joint tax refund documents.

There is no specific schedule set by the IRS but mail will be eventually sent to you if you are qualified to receive a refund.

Tracking My Tax Refund And Tax Transcript

If you want to know the status of your refund you can use any of the following IRS tools:

  • Where’s My Refund tool (you can access it by visiting IRS official website)
  • Amended Return Status tool (for those who filed for an amended return).

If you want to review or get a copy of your tax transcript, just follow the steps below:

  1. Visit the IRS official site
  2. Log in to your IRS account. Still don’t have one? You can create one as you visit the IRS website.
  3. Once you are logged in, on your account home page, tick the View Tax Records option;
  4. On the next page, tick the Get Transcript option;
  5. Select the reason for needing the tax transcript;
  6. Choose the 2020 tax return records and check if the file has an entry listed as Refund Issued. If otherwise then most probably the IRS has not reviewed your records yet.

Filing for Amended Return

The IRS does not require taxpayers to file an amended return to get a refund. Although in some cases, some taxpayers might be required to. An amended return is needed when your reviewed and recalculated Adjusted Gross Income or AGI results to an amount that qualifies you for other credits and exemption from the federal government.

For example, if you were previously not eligible for Earned Income Tax Credit, Child Tax Credit, or the American Opportunity Tax Credit, changes in your AGI will make you eligible for it. You will know if you qualify for other deductions or claims when the IRS notifies you so. Take note that there might be other requirements or documents that you need to file. It is advised that taxpayers check their state tax returns for possible benefits as well.

Unemployment Fraud

Due to the ubiquitous transactions related to tax refunds, the prevalence of criminals who wants to get money from it also increases. Hence you should be alert for any indication of fraudulence on your tax refunds.

If ever you receive mail such as the 1099-G form which contains wrong information related to unemployment benefits that you have not received, it is important to report the fraud right away.

Frequently Asked Questions
What If I Have An IRS Individual Taxpayer Identification Number Or ITIN Instead Of A Social Security Number, Am I Still Eligible For A Refund?

You can be eligible for the exclusion regardless of the filing status. This means that people who have ITIN can be eligible, the same goes for those who have SSN so long as they meet the 150,000 US dollars limit of Modified Adjusted Gross Income.

Am I Eligible For The Refund If I Am A Non-Resident Alien Who Filed A 1040-NR Form?

You can still be eligible for the 10,200 US dollars tax exclusion so long as you meet the income requirement. If you are married, your spouse will file their own 1040-NR form, including the unemployment compensation exclusion of the 10,200 US dollars so long as s/he meets the Modified Adjusted Gross Income requirement. Further, you should take note that you cannot include your spouse’s exclusion in your own tax return even though you consider your spouse as a dependent.

MAGI Or Modified Adjusted Gross Income

In relation to the tax exclusion, the MAGI refers to the Adjusted Gross Income that is shown in line 11 of your 1040 form, 1040-SR form, or 1040-NR form. This is minus the total amount of the unemployment compensation listed on schedule 1 line 7.

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