IRS may owe you from 2020 taxes. Here's why and what you need to do to find out if you're owed
Many Americans may still be owed money from their 2020 tax year returns but are now on their own to find and claim it.
Under the American Rescue Plan Act, individuals who received unemployment benefits in 2020 could exclude from their taxable income up to $10,200 (or double that for couples) if they earned less than $150,000 per year.
Since this one-time pandemic-relief change came in March 2021, after tax season started, and 76 million Americans had already filed their taxes, the IRS said it would make the corrections for people.
Earlier this month, though, IRS said it was finished with its corrections and anyone it may have missed would now have to file an amended return.
Basically, the IRS has shifted back the burden of correcting old tax returns to taxpayers. Though it’s hard to quantify exactly how many people are affected, accountants warn this could be quite a burden for the unlucky ones who have to file a 1040-X, the amended tax form needed to correct the issue.
“Most likely, the 1040-X is not intuitive,” said Ryan Losi, executive vice president at certified public accounting firm PIASCIK. Most people who must amend their returns will likely have to pay someone to help them or buy additional software to figure it out, accountants warn.
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What makes filing an amendment so complicated?
It's not as simple as just subtracting the unemployment benefits from your taxable income, or adjusted gross income (AGI), explains Mark Steber, chief tax information officer at tax preparer Jackson Hewitt.
“You have to consider what else is in the return,” he said. That's because changes in AGI can directly affect the deductions and credits you are eligible for. “You might qualify for some of those now.”
In the approximately 14 million returns the IRS corrected, the agency even noted many of the adjustments included corrections to the:
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Earned Income Tax Credit
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Recovery Rebate Credit
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Additional Child Tax Credit
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American Opportunity Tax Credit
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Premium Tax Credit
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Advance Premium Tax Credit
Additionally, state income tax returns might have to be amended, Steber said. Many states with income tax use your federal taxable income as the starting point for calculating your state taxable income.
Better footing: IRS tax backlog smaller leading into 2023 tax season than it was in 2022
Double your money: File your taxes early for a chance to double your refund money with Jackson Hewitt