The American Rescue Plan Act (ARPA) officially went into effect in March of 2021. It was part of the COVID-19 relief package designed to provide $1.9 trillion to boost the economy. Many affected by the pandemic could receive tax breaks from the ARPA but might not realize it. If you received unemployment benefits in the 2020 tax year due to job loss from the pandemic, you could be eligible for a tax refund of up to $10,200.
If you filed your taxes after the ARPA was established, you should automatically get that refund on your tax return. However, if you have already filed and received your return, you’ll need to do a little extra work for your refund. How can you get the money you deserve?
A CPA in Austin can help you navigate your federal return so you can get the refund that you deserve. Here’s what you need to know about the ARPA and how it can benefit you if you drew from unemployment in the 2020 tax year.
How the ARPA Affects Unemployment Benefits
Unemployment benefits are treated as taxable income on the federal tax return. Put simply, they’re treated and taxed as the proceeds from a job would be treated. Thanks to the ARPA, federal tax has been waived on up to $10,200 in unemployment benefits for each individual. It’s free money in the sense that you won’t owe taxes and the income doesn’t have to be paid back.
What that means is, if you received unemployment benefits, you won’t need to pay any tax on unemployment payments you received up to $10,200. If you received more than that in unemployment benefits, you’ll need to pay tax on the portion over the limit of $10,200. That’s a significant tax break for anyone who got benefits and will bring down your total tax liability. It could also mean a large refund if you’ve already paid taxes.
When You Should Get Your Refund
People who filed tax returns before the change brought on by the ARPA took effect should start seeing refunds in the month of May. Single people and those who filed separately from their spouses will be the first to receive their refunds, with joint filers seeing refunds next. If you filed your taxes before the ARPA change, you haven’t lost out on a potential refund.
How to Claim the Exemption
If you’re eligible for the ARPA unemployment refund but filed your taxes early, you don’t need to worry. The IRS has stated that you won’t need to file an amended return. They will determine who needs a refund and automatically send the money out as a direct deposit or paper check, depending on what information you provided on your 2020 tax return.
A CPA in Austin Can Help
Need to amend your 941 return to get a refund on your unemployment benefits? Insogna and its team can help your business navigate the process when we’re engaged to help you and your business with ongoing monthly CPA services. Contact us today and let’s meet to learn more about your CPA needs.