Latest Update: The guidance on the Form 8962 procedures will be coming to IRS.gov soon. Please monitor the site for the latest information.
Section 9662 of the American Rescue Plan Act suspends the excess APTC repayment requirement for TY 2020.
TAXPAYER WHO HAS NOT FILED A 2020 TAX RETURN AND OWES EXCESS APTC.
- Do not attach Form 8962, Premium Tax Credit.
- Do not include an amount on Form 1040 or Form 1040-SR. Schedule 2, Line 2.
- The IRS will not correspond for a missing Form 8962 or ask for more information if you owe excess APTC for TY2020.
TAXPAYER WHO HAS NOT FILED A 2020 TAX RETURN AND IS CLAIMING NET PTC.
- Attach Form 8962, Premium Tax Credit.
- Include the net premium tax credit on Form 1040 or 1040-SR, Schedule 3, Line 8.
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WASHINGTON — To help taxpayers, the Internal Revenue Service announced today that it will take steps to automatically refund money this spring and summer to people who filed their tax return reporting unemployment compensation before the recent changes made by the American Rescue Plan.
The legislation, signed on March 11, allows taxpayers who earned less than $150,000 in modified adjusted gross income to exclude unemployment compensation up to $20,400 if married filing jointly and $10,200 for all other eligible taxpayers. The legislation excludes only 2020 unemployment benefits from taxes.
Because the change occurred after some people filed their taxes, the IRS will take steps in the spring and summer to make the appropriate change to their return, which may result in a refund. The first refunds are expected to be made in May and will continue into the summer.
For those taxpayers who already have filed and figured their tax based on the full amount of unemployment compensation, the IRS will determine the correct taxable amount of unemployment compensation and tax. Any resulting overpayment of tax will be either refunded or applied to other outstanding taxes owed.
For those who have already filed, the IRS will do these recalculations in two phases, starting with those taxpayers eligible for the up to $10,200 exclusion. The IRS will then adjust returns for those married filing jointly taxpayers who are eligible for the up to $20,400 exclusion and others with more complex returns.
There is no need for taxpayers to file an amended return unless the calculations make the taxpayer newly eligible for additional federal credits and deductions not already included on the original tax return.
For example, the IRS can adjust returns for those taxpayers who claimed the Earned Income Tax Credit (EITC) and, because the exclusion changed the income level, may now be eligible for an increase in the EITC amount which may result in a larger refund. However, taxpayers would have to file an amended return if they did not originally claim the EITC or other credits but now are eligible because the exclusion changed their income.
These taxpayers may want to review their state tax returns as well.
According to the U.S. Department of Labor, Office of Employment and Training (ETA), over 23 million U.S. workers nationwide filed for unemployment last year. For the first time, some self-employed workers qualified for unemployed benefits as well. The IRS is working to determine how many workers affected by the tax change already have filed their tax returns.
The new IRS guidance also includes details for those eligible taxpayers who have not yet filed.
The IRS has worked with the tax return preparation software industry to reflect these updates so people who choose to file electronically simply need to respond to the related questions when electronically preparing their tax returns. See New Exclusion of up to $10,200 of Unemployment Compensation for information and examples. For others, instructions and an updated worksheet about the exclusion were available in March and posted to IRS.gov/form1040. These instructions can assist taxpayers who have not yet filed to prepare returns correctly.
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Latest Update: ProConnect has been updated to reflect the federal unemployment compensation exclusion. See this Help Article for Generating the Unemployment Compensation Exclusion in ProConnect
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Latest Update: We expect an update to ProConnect Tax on Thursday, March 18, 2021 in the afternoon to address changes for federal returns.
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Latest Update: Check out our newest Help Article for Common Questions on the Unemployment Compensation Exclusion
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Intuit is working closely with the IRS and is committed to getting you the latest IRS guidance for TY20 and what the American Rescue Plan means for you and your clients. We will keep you updated on new IRS guidance and when you can expect programs to be updated.
For the latest and greatest, check out our COVID-19 Resource Center, our Tax Pro Center post about the American Rescue Plan, or the Tax Law and News on the Tax Pro Center.
Join us on March 25th at 11 AM CT for a free webinar designed to update you on the tax implications for you and your clients. Register for this American Rescue Plan Act of 2021 - Key Measures & Insights webinar today. Sign up here.
Related Help Articles:
Common Questions on the Unemployment Compensation Exclusion
Generating the Unemployment Compensation Exclusion in ProConnect
Please check here for the latest on the American Rescue Plan.
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