A tax law change passed in March 2021 allows you to exclude up to $10,200 of unemployment compensation from your 2020 income. This is a benefit to you.
However, if your taxes were filed before this change was in effect, you may have paid too much tax.
What should you do? For now, do nothing. Later, keep in touch.
The IRS has stated they will automatically adjust for this change. They will start sending refunds in May, continuing over the summer months. However, they will not adjust for other tax breaks that might kick in when you lower your income (e.g, Earned Income Credit, Retirement Savings Credit, etc.).
To ensure you receive the full amount related to this tax change, when you get your unemployment-related refund from the IRS please let us know how much you received. We will review your tax return and calculate what we believe you should have received from the IRS. We can then determine what action, if any, is necessary. Keep in mind, this refund is separate and different from the EIP (Stimulus) money.
There is no charge for us to double check your refund amount. If it turns you didn’t get the full amount allowed, we will charge a fee for the additional work to amend your taxes.
This change affects Ohio taxes as well. We are hopeful Ohio will also make the adjustment automatically.
We expect the IRS adjustment to be correct most of the time. But, just in case, please keep us posted so we can double check. Please let us know if you have any questions.