Change in tax on unemployment benefits could mean you’re due extra money in refunds

Investigators

RALEIGH, N.C. (WNCN) – Unemployed people who have filed their taxes already might be due extra money in their refunds because of the change in the way unemployment benefits are taxed.

By the time Congress passed and the president signed the American Rescue Plan, millions of taxpayers had already filed their 2020 tax returns, which included them paying taxes on their unemployment benefits.

The legislation allowed for some of those unemployment taxes to be deducted.

“IF you earned less than $150,000 last year, $10,200 of those unemployment benefits are not taxable to you,” said CBS Business reporter Jill Schlesinger.

Those refunds are only on federal tax returns.

Last year, about 950,000 North Carolinians were unemployed, making them eligible for federal refunds. However, the state of North Carolina is not following the federal government’s lead and those unemployment benefits will be taxed on the state level.

Anyone who hasn’t yet filed can claim the federal unemployment deduction on their tax form. For anyone who already filed and didn’t claim it, there is no need to file an amended return.

The IRS sends out the money in phases. Single taxpayers who received unemployment benefits will get their payments in the first wave. Married couples who both received unemployment will be included in the second phase. Those payments will continue well into the summer as the IRS juggles processing returns and other duties. 

The break on federal unemployment taxes only applies to this tax year. Anyone still on unemployment now may want to have federal taxes voluntarily withheld. Both the state and the federal governments have forms to file in order to do that.

Making those voluntary deductions can mean avoiding a bigger tax bill when filing for 2021.

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