May 3, 2021 10:50 pm

Earned Income Tax Credit Refigured?

If you received unemployment benefits in 2020, you may be eligible for an earned income tax credit (EITC) if you didn’t claim one, or a larger one if you did. Why? The American Rescue Plan Act provided that up to $10,200 in unemployment benefits are excludable from gross income, provided adjusted gross income is less than $150,000. Those who didn’t yet file their 2020 federal income tax returns should not include such benefits if eligible for tax-free treatment. Those who already filed do not have to submit an amended return; the IRS will make adjustments to recalculate taxes and, where applicable remit refunds (IR-2021-71). The process will begin in May 2021.

With respect to the EITC:

  • If you already filed your 2020 return and claimed an EITC, the IRS will make adjustments related to the excluded unemployment benefits.
  • If you already filed your 2020 return but did not claim any EITC although now eligible for it, you must file an amended return to seek a tax refund.

Note: Review your state income tax returns to see whether adjustments and amended returns are needed.

advertisement
Tax Glossary

Incentive stock option

Option meeting tax law tests that defers tax on the option transaction until the obtained stock is sold.

More terms