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Tax exemption on unemployment benefits
A new tax exemption could mean bigger refunds of million of people who received unemployment in 2020.
ORANGE COUNTY, Fla. - Millions of Americans may have to amend their 2020 tax returns because of a new tax exemption that could potentially mean a bigger refund.
Under the recently passed American Rescue Plan, people do not have to pay the taxes on the first $10,200 of unemployment benefits received in 2020.
Accountant Yvette Anderson, owner of Mobile Financial Services, this could mean a potential refund for lots of taxpayers or a reduction in the amount of money they must pay the IRS if they owe taxes.
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"We'll use the example of the exemption of $10,200. If you elected to pay federal tax, you would save 1,020 dollars, meaning, instead of paying that to the federal government, you can receive that back," Anderson said. "Those people who did not know or they elected not to pay federal taxes, this is going to help them a lot; $1,020 can pay a bill."
Anderson is encouraging people who have already filed their returns and been taxed on unemployment benefits to be patient and wait for guidance from the IRS. She said the IRS is expected to announce how it will address the new exemption this week.
"It could still mean that you may have to amend your return, but that has not been confirmed."
"Every single person who got unemployment should know this benefit is available to them," said Carol Weber of Orlando. She said she received unemployment benefits in 2020 when she couldn’t find a job during the pandemic. She said she expects to benefit from this new exemption.
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"I only made a little bit over the $10,000 so pretty much all of it is going to be exempt for me. It was like wow and happy dance. I am just thrilled with not having to worry about owing the IRS for that money."
Stay with FOX 35 Orlando for the latest on this story.