IRS may owe you from 2020 taxes. Here's why and what you need to do to find out if you're owed.

2023-02-01

Many Americans may still be owed money from their 2020 tax year returns but are now on their own to find and claim it.

Under the American Rescue Plan Act, individuals who received unemployment benefits in 2020 could exclude from their taxable incomeup to $10,200 (or double that for couples) if they earned less than $150,000 per year.

Since this one-time pandemic-relief change came in March 2021, after tax season started, and 76 million Americans had already filed their taxes, the IRS said it would make the corrections for people.

Earlier this month, though, IRS said it was finished with its corrections and anyone it may have missed would now have to file an amended return.

Basically, the IRS has shifted back the burden of correcting old tax returns to taxpayers. Though it’s hard to quantify exactly how many people are affected, accountants warn this could be quite a burden for the unlucky ones who have to file a 1040-X, the amended tax form needed to correct the issue.

“Most likely, the 1040-X is not intuitive,” said Ryan Losi, executive vice president at certified public accounting firm PIASCIK. Most people who must amend their returns will likely have to pay someone to help them or buy additional software to figure it out, accountants warn.

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What makes filing an amendment so complicated?

It's not as simple as just subtracting the unemployment benefits from your taxable income, or adjusted gross income (AGI), explains Mark Steber, chief tax information officer at tax preparer Jackson Hewitt.

“You have to consider what else is in the return,” he said. That's because changes in AGI can directly affect the deductions and credits you are eligible for. “You might qualify for some of those now.”

In the approximately 14 million returns the IRS corrected, the agency even noted many of the adjustments included corrections to the:

Earned Income Tax Credit
Recovery Rebate Credit
Additional Child Tax Credit
American Opportunity Tax Credit
Premium Tax Credit
Advance Premium Tax Credit

Additionally, state income tax returns might have to be amended, Steber said. Many states with income tax use your federal taxable income as the starting point for calculating your state taxable income.

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One last wrinkle is that amended returns must still go through the old IRS manual process behind the scenes, even if they are filed electronically. Once the IRS receives them, "someone still has to key it in manually,” Steber said. That means it will take at least a few months to get a refund if you’re owed one, and that’s if there are no problems.

Is it worth it to file an amended tax return?

It depends on whether you think you’re due a refund and how much it might be. The amended returns can’t be filed via IRS free file, and of the roughly 14 million returns the IRS corrected, it said it issued 12 million refunds totaling $14.8 billion, with an average refund of $1,232.

First, check your 2020 tax return to see if you included the unemployment compensation exclusion on your 1040. If you received jobless benefits and didn't enter an exclusion, you could try to calculate what you might have overpaid using the IRS' unemployment compensation exclusion worksheet. It might be hard, though, to tell how much the unemployment exclusion would affect your federal and state returns, so Steber suggests considering taking your return to a professional for a look.

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Large tax preparers like Jackson Hewitt offer free “lookbacks,” which is when a tax preparer reviews up to three years of past returns to see if everything was accounted for or if anything is missed.

If the preparer finds something, it will offer to amend and refile it for you for a fee. Steber says fees vary due to location and how complicated the return is but “usually, it’s a pretty low fee.”

If you're still stumped or having tax issues, consumers can also tap the Taxpayer Advocate Service, an independent organization within the IRS, for help.

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How long do I have to file an amended return?

For a credit or a refund, amended returns must be filed within three years after the date you filed your original return or within two years after the date you paid the tax, whichever is later, the IRS says. That means you must file the amended 2020 tax return by next year.

But like any other tax return, amended or not, filing earlier is always better, Steber said.

IRS may owe you from 2020 taxes. Here's why and what you need to do to find out if you're owed.

What makes filing an amendment so complicated?

Is it worth it to file an amended tax return?

How long do I have to file an amended return?

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