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IRS Sex workers taxes

IRS completes automatic corrections of tax year 2020 accounts related to unemployment compensation exclusion; 12 million refunds issued

WASHINGTON – The Internal Revenue Service recently completed the final corrections of tax year 2020 accounts for taxpayers who overpaid their taxes on unemployment compensation they received in 2020.
The American Rescue Plan Act of 2021, which became law in March 2021, excluded up to $10,200 in 2020 unemployment compensation from taxable income calculations (up to $10,200 for each spouse if married filing joint). The exclusion applied to individuals and married couples whose modified adjusted gross income was less than $150,000.
To ease the burden on taxpayers, the IRS took steps to review the Forms 1040 and 1040SR that were filed prior to the law’s enactment to identify taxpayers who had already reported unemployment compensation as income and were eligible for the correction. The IRS determined the correct taxable amount of unemployment compensation and tax.
Some taxpayers received refunds, while others had the overpayment applied to taxes due or other debts. In some cases, the exclusion only resulted in a reduction in their adjusted gross income. The IRS mailed a letter to these taxpayers to inform them of the corrections. Taxpayers should keep that letter with their tax records.
The IRS corrected approximately 14 million returns. This resulted in nearly 12 million refunds totaling $14.8 billion, with an average refund of $1,232.
Many of the adjustments included corrections to the:
• Earned Income Tax Credit
• Recovery Rebate Credit
• Additional Child Tax Credit
• American Opportunity Tax Credit
• Premium Tax Credit
• Advance Premium Tax Credit
If a taxpayer is eligible for the unemployment compensation exclusion and their account was not corrected by the IRS, they may need to file an amended 2020 tax return to claim the exclusion and any applicable non-refundable or refundable credits impacted by the exclusion.
Taxpayers should not file an amended return if they previously filed one claiming the exclusion. For more information about this, including eligibility requirements, taxpayers should read the 2020 Unemployment Compensation Exclusion FAQs on IRS.gov.
If they do need to amend tax year 2020 Forms 1040 and 1040-SR, taxpayers can file Form 1040-X, Amended U.S. Individual Income Tax Return, electronically with tax filing software.
Taxpayers can view their 2020 tax records in their Online Account or request that a 2020 tax account transcript be mailed to them.

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IRS Sex workers taxes

The first step of tax preparation is gathering records

As taxpayers get ready to file their 2020 tax return, they should start by gathering their records. Taxpayers should gather all year-end income documents to help ensure they file a complete and accurate 2020 tax return and avoid refund delays.
Taxpayers should have all necessary records handy, such as W-2s, 1099s, receipts, canceled checks and other documents that support any income, deductions or credits on their tax return.
Most taxpayers should have already received income documents including:
• Forms W-2, Wage and Tax Statement
• Form 1099-MISC, Miscellaneous Income
• Form 1099-INT, Interest Income
• Form 1099-NEC, Nonemployee Compensation
• Form 1099-G, Certain Government Payments; like unemployment compensation or state tax refund
• Form 1095-A, Health Insurance Marketplace Statements
Here are a couple other things taxpayers can do to prepare to file.
View IRS account online
Taxpayers can view their online account. This allows them to see the latest information about their federal tax account and most recently filed tax return through a secure and convenient tool on IRS.gov. This can help taxpayers if they need information from last year’s return.
People with an account on IRS.gov can also see the amounts of their Economic Impact Payments. This will be helpful to eligible individuals who either did not receive any Economic Impact Payments or received less than the full payments. They may claim the recovery rebate credit on their 2020 federal tax return.
People should visit Secure Access: How to Register for Certain Online Self-Help Tools for more information about how to create an account or how to reset the username or password.
Review unemployment benefits
Unemployment compensation is taxable and must be included as gross income on a taxpayer’s return.
Taxpayers should receive a Form 1099-G showing their unemployment income. They can have federal taxes withheld from their unemployment benefits or make estimated tax payments, but many do neither. In that case, taxes on those benefits need to be paid when their 2020 tax return is filed. Therefore, taxpayers who didn’t have tax withheld from their payments may see a smaller refund than expected or possibly have a tax bill.
Individuals who receive a Form 1099-G for unemployment compensation they were not paid should contact their state tax agency and request a corrected Form 1099-G. States should not issue Forms 1099-Gs to taxpayers they know to be victims of identity theft involving unemployment compensation. Taxpayers should file an accurate return including the income they actually received.
Taxpayers who are victims of identity theft involving unemployment compensation should not file an identity theft affidavit with the IRS.