The IRS will automatically adjust 2020 returns for taxpayers who filed prior to the enactment of the unemployment compensation exclusion included in the American Rescue Plan Act. (IR-2021-71) The returns will be adjusted to exclude up to $10,200 ($20,400 for MFJ) of unemployment compensation for taxpayers with modified AGI of less than $150,000.
The IRS expects that the first refunds will not be issued until May and will continue into the summer. With processing delays at the IRS, it is unlikely that filing an amended return will generate a refund any faster. However, the IRS has confirmed that the automatic adjustments will not increase any other benefits on the taxpayers’ returns that are limited by AGI. As a result, for clients who will benefit from increased Recovery Rebate Credits, Earned Income Credits, etc., you may want to consider amending those returns.
Though the IRS has stated they will also be automatically refunding excess Premium Tax Credits that were paid with 2020 returns, there was no information on those refunds included in this guidance.