Update For Taxpayers Who Qualified For The $10,200 Exclusion on Unemployment Benefits But Filed Too Early to Get It

Taxpayers who received unemployment benefits during 2020 could exclude the first $10,200 of benefits received from their taxable income as long as their total income reported on their tax returns was less than $150,000. This rule wasn’t enacted until March causing eligible taxpayers who filed their returns prior to mid-March 2021 to miss out on this tax break. More info on this opportunity is available at: New Exclusion of up to $10,200 of Unemployment Compensation | Internal Revenue Service (irs.gov)

If you paid federal taxes on up to $10.2k of 2020 unemployment benefits that should have been tax-free, please hold off amending your tax return at this time. Instead, as stated on the IRS website:

“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.”

Therefore, no federal amended tax return is necessary. However, if your reduction in taxable unemployment benefits impacts other tax credits, you will need to amend your federal tax return. Please contact your tax preparer if you received an automatic federal refund for the unemployment exclusion to confirm whether there is any additional impact on your federal taxes. Additionally, your tax preparer can follow up with your specific state’s rules to determine if amending your state income tax return may be necessary.

With regard to this refund, if a taxpayer’s bank information is included on the 2020 federal tax return, then the refund will be paid via direct deposit. Otherwise, a check will be mailed to the taxpayer’s address per the tax return filed for 2020. Additionally, taxpayers will receive a notice from the IRS explaining the adjustments.

Where’s My Refund?

If you have filed your tax return and are waiting on your refund, you can get an update on the status of the processing of your federal tax return by going to the IRS link: https://www.irs.gov/refunds and clicking on the Check My Refund Status button.

Be prepared to provide the following information:

  • Your social security number
  • Your filing status
  • Your exact refund amount

Once input, this link provides the status of whether or not your federal tax return has been processed and if so, the anticipated date of refund or the date the refund was sent. The IRS updates this site once daily.

Taxpayers can also check on the status of their recently filed amended returns as well using this link https://www.irs.gov/refunds

Additional Plug-In Vehicles Qualify for Tax Credit of Up To $7,500

Plug-in electric drive motor vehicles are picking up steam.

According to the IRS: Internal Revenue Code Section 30D provides a credit for Qualified Plug-in Electric Drive Motor Vehicles including passenger vehicles and light trucks. For vehicles acquired after 12/31/2009, the credit is equal to $2,500 plus, for a vehicle which draws propulsion energy from a battery with at least 5 kilowatt hours of capacity, $417, plus an additional $417 for each kilowatt hour of battery capacity in excess of 5 kilowatt hours. The total amount of the credit allowed for a vehicle is limited to $7,500.

Only the initial purchaser of the vehicle gets this tax credit. A few recent additions to the IRS list of plug-in motor vehicles qualifying for this valuable tax credit include:

  • 2022 BMW 745e xDrive qualifies for a $5,836 tax credit
  • 2022 MINI Cooper S E Countryman ALL4 qualifies for a $5,002 tax credit
  • 2022 MINI Cooper S E Hardtop qualifies for a $7,500 tax credit
  • 2021 Porsche Taycan EV qualifies for a $7,500 tax credit

For those of you who enjoy “the finer things in life”, Bentley Motors recently added a vehicle qualifying for the plug-in electric motor vehicle tax credit. Purchasing a new 2020 or 2021 Bentley Motors Bentayga Hybrid SUV provides you with a $7,500 tax credit on your personal tax return.

 Please note that General Motors and Tesla vehicles no longer qualify for this tax credit since they each sold more than 200,000 eligible vehicles. You can find the full list of vehicles qualifying for the Plug-in Electric Drive Motor Vehicle federal tax credit by clicking on the IRS Link below:

 https://www.irs.gov/businesses/irc-30d-new-qualified-plug-in-electric-drive-motor-vehicle-credit