Under ARPA, the first $10,200 of unemployment benefits received in 2020 are exempt from federal income tax. Starting last week, the IRS began sending out refunds to taxpayers who filed their tax returns before the law passed and who consequently overpaid on their 2020 taxes. Most taxpayers in this situation do not need to file an amended return or take any action to receive this additional refund. However, as the IRS explains in this news release, taxpayers who are now eligible for additional tax credits due to the decrease in taxable income should file an amended return. These credits include the Additional Child Tax Credit, Recovery Rebate Credit, Earning Income Credit and the Advance Premium Tax Credit. Additional information about this exclusion can be found in the IRS FAQs.
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