IRS 2020 Unemployment Refunds: File by May 17

Millions of taxpayers who were out of work during the height of the COVID-19 pandemic may be leaving significant sums of money on the table, and the Internal Revenue Service is issuing a final call to claim what is theirs.

The federal tax agency is reminding residents that they may still be owed a refund for the 2020 tax year, a result of a late-breaking policy shift included in the American Rescue Plan. Signed into law in March 2021, the plan retroactively allowed taxpayers to exclude up to $10,200 in unemployment benefits from their taxable income for the 2020 tax year, provided their adjusted gross income (AGI) was less than $150,000. For married couples filing jointly, that exclusion could reach as high as $20,400.

In the immediate wake of the law’s passage, the IRS worked to identify eligible filers, automatically adjusting approximately 13.7 million returns and issuing over $14.8 billion in refunds. For the average recipient, that meant an extra $1,200 deposited into their bank account.

However, tax experts note that thousands of eligible filers were excluded from these automatic updates. Common roadblocks included taxpayers with complex tax situations, those who filed their original returns incorrectly, or individuals whose state-level tax filings were not automatically reconciled with federal changes.

Now, a ticking clock has put a hard deadline on these claims. Because taxpayers generally have three years from the date they filed their original 2020 return to request a refund, many are facing a cutoff date of May 17, 2024.

“It is a classic case of money sitting on the table,” says local tax advisor Marcus Thorne. “Many people assume that if the IRS didn’t catch it automatically, they aren’t entitled to it. That is simply not the case. If your 2020 income was under that $150,000 threshold and you paid taxes on your unemployment benefits, you owe it to yourself to double-check that filing.”

Beyond simply recovering taxes paid on unemployment, those who qualify may also be eligible for a secondary windfall. By lowering their adjusted gross income through the $10,200 exclusion, some taxpayers may find they now qualify for credits they were previously denied, such as the Earned Income Tax Credit (EITC) or the Premium Tax Credit (PTC) for health insurance.

To claim the refund or adjust for these additional credits, taxpayers must file Form 1040-X, “Amended U.S. Individual Income Tax Return.”

The IRS recommends that taxpayers first review their 2020 tax records to see if they already received an adjustment or if they were eligible for the unemployment exclusion but never received a benefit. Detailed instructions, as well as the 1040-X form, can be found on the official IRS website at www.irs.gov.

For those who need assistance, the IRS provides a free “Interactive Tax Assistant” tool on their website to help determine eligibility. Because the May 17 deadline is firm, tax professionals are urging residents to take action immediately, noting that processing times for amended returns can take several weeks.

If you are unsure whether you received the adjustment, you can check your “Tax Account” transcript on IRS.gov, which displays a comprehensive history of any changes made to your return since the date it was originally filed.