﻿Alright, everybody, Logan Allec CPA here, I help people with their back taxes,
if you owe the IRS or your state taxing authority at least $10,000 in back taxes,
shoot me an email at taxrelief@loganallec.com. This video is a follow-up to the video I created
yesterday based on a comment I received on that video. So in this video I’m just going to clear up
some confusion I’ve seen, I think I’ve covered a lot of this information in other videos, but that
information has been scattered across several videos I’ve created over the past couple months,
so I thought I would just answer all the questions here in one video. First of all
it appears that some of you, no, a few of you have actually received your refund for
the $10,200 from the IRS. I asked yesterday for people to comment yes or no if they’ve received
it. Paul said he got his in Chime, by the way, you can get a seventy-five-dollar bonus right now with
Chime if you open up a Chime account through my link below and your Chime account receives
a qualifying direct deposit of two hundred dollars or more within the first forty-five days
of when you opened up your Chime account. So Paul says he got it, Ginny Silver who has been doing a
great job covering California EDD issues said that some people in her audience received it,
she ran a poll in her community tab asking this question, and some people like Michael Sevilla
said he got it though he’s the only one he knows of, Casey Louis said he got it, so a few folks
in my audience said they got it, a few people in Ginny’s audience said they got it, but the
vast majority of people have not, and that’s sad. But it’s good knows that Paul in my audience said
he got his through Chime already, because Chime usually advances these kinds of payments, we saw
that with stimulus as well, so hopefully more of y’all on direct deposit with the IRS will see it
in your bank account this week. So the next thing I want to clear up is the amount of your refund.
Jessica Ochoa commented, “Hi Logan, I made $11,039 in unemployment and eleven hundred dollars was
taken out in federal taxes. Am I qualified if so how much do you think I'll be getting back
that's if they send out refund any time soon?” Well, first, does Jessica qualify? And the answer
is that yes if you made less than one hundred and fifty thousand dollars last year. So let’s
get that out of the way. Then, how much of a refund could Jessica expect? Well, I can’t tell
you exactly, Jessica, without knowing all your numbers, but generally speaking, the amount you
can expect is the taxes you overpaid as a result of including the ten thousand, two hundred dollars
in your taxable income when you originally filed your tax return. So if you filed your tax return
before the American Rescue Plan was passed that made the first ten thousand, two hundred dollars
of unemployment compensation received in 2020 non-taxable for taxpayers making less than one
hundred and fifty thousand dollars, then you included the entire ten thousand,
two hundred dollars in your income on your 2020 tax return and overpaid tax on that amount. So
how much could you expect your refund to be? This depends on your marginal tax rate. So Jessica,
I obviously don’t know your situation, but if I assume that you’re single with no dependents and
you made twenty-five thousand dollars in 2020 along with the eleven grand in unemployment
compensation and you took the standard deduction, your marginal tax rate for 2020
would be twelve percent, so the federal income taxes you overpaid on the ten thousand two hundred
dollars is ten thousand two hundred dollars times twelve percent, so ten thousand two hundred
dollars times your marginal tax rate of twelve percent yields an expected one thousand, two
hundred and twenty-four dollar tax refund expected from the IRS. Note that this math does not include
increased refund amounts attributable to increased credits or deductions you are eligible
for as a result of your adjusted gross income decreasing due to the tax law change for the ten
thousand, two hundred. So don’t hold me to the figure I calculated, Jessica, because, A,
nothing in this video is tax advice, this video is for general informational purposes only,
and B, because I made some assumptions there about your situation that may not be accurate, but
that’s how the math works in general. And by the way, Jessica, this is just your federal refund,
that’s how the math works, for state, assuming you’re owed a refund for state, which you may
not be, I’ll talk about that later, you would do the same math for your state. Next thing I want to
comment on is should you amend your return for the $10,200 and this comment comes from Tanaka
Jyuhaci, forgive my pronunciation, but this individual commented, “Jackson Hewitt is telling
me to file an amended tax form for state and local and TaxAct is saying not to file an amended
1040X.” So there are a couple issues here, and that is that it seems that these are two separate
issues, one is the state and local taxes issue and the other is the federal issue. So Jackson
Hewitt is telling Tanaka to file an amended state and local tax return. So you will have
to amend your state tax return to adjust for the $10,200. Other states are automatically adjusting
the $10,200 similar to what the IRS is doing so an amended return is unnecessary. For example,
Massachusetts issued Technical Information Release Twenty-One Dash 6 that says “Taxpayers who have
already filed their 2020 personal income tax returns and reported unemployment compensation
as income should not file amended returns at this time. The Department of Revenue (‘Department’)
expects to send notices to taxpayers who reported unemployment to explain whether those persons may
be eligible for relief. If a taxpayer is eligible for a refund, the Department will issue a refund
payment to the taxpayer and the taxpayer need not take any action.” So Massachusetts residents
don’t have to amend their return per the Massachusetts Department of Revenue. But the New
Mexico Taxation and Revenue Department, on the other hand, issued New Mexico Bulletin B
Dash Three Hundred Point Twenty-Two, which reads, “New Mexico personal income tax is based on the
reported federal AGI. If excluding unemployment compensation on the federal return will decrease
their federal AGI, taxpayers who have already filed their 2020 PIT-1” -- and PIT-1 is the New
Mexico personal income tax return -- “may wish to amend their return.” So just by way of example,
while Massachusetts is saying that Massachusetts residents don’t need to amend their state income
tax return for the ten thousand, two hundred, New Mexico is suggesting that residents should amend
their state tax return to account for the ten thousand, two hundred. So I originally thought
that the reason that Jackson Hewitt is telling Tanaka to amend his or her state income tax return
is because Tanaka lives in a state like New Mexico that isn’t automatically adjusting for
the ten thousand two hundred adjustment and so taxpayers have to file amended state returns. But
it actually turns out that Jackson Hewitt might be giving Tanaka outdated information because I asked
Tanaka what state she’s in and she said Illinois and she said her state, Illinois, sent her a
letter stating that she can expect a paper check in the mail in two to three weeks for this refund,
and that is consistent with information I found on the Illinois Department of Revenue’s website,
which says that if you filed your Illinois tax return return electronically before March 15,
then the Illinois Department of Revenue will automatically update your return and you can
expect a paper check. But if you filed your Illinois tax return by paper on any date
or you filed your Illinois tax return after March 14, then you will need to file an amended
return using Form Illinois 1040X. So Tanaka, I’m assuming you filed your Illinois return
electronically before March 15, and that’s why the state is automatically adjusting your return
and sending you a paper check refund. So you can see this is very tricky and very state-by-state,
so you really have to check your state department of revenue’s website to see the procedure for your
state whether or not you have to amend your state tax return for the $10,200 adjustment. And by
the way, other states, such as California where I live, don’t tax unemployment compensation at all,
so there is no adjustment to be made for the state return because the $10,200 wasn’t included
as income in the first place in those states. And other states, such as New York, haven’t yet said
that they would exempt the $10,200 for state income tax purposes. There are some members of the
New York State Senate who are pushing for that, but that hasn’t been passed. So you really have
to keep your eye on your state, check your state department of revenue and taxation’s website,
check their Twitter, sign up for updates from them, and all that.
Alright, so what I’ve said so far about whether you live in this state or that state
in answering this question only pertains to state income tax returns, and the amount
you receive from your state as a refund will depend on your marginal state income tax rate.
That is a completely different issue from the refund you can expect from the IRS
on the $10,200. This has nothing to do with the federal return and whether or not you have to
amend your federal return. That is a separate question. It is possible that you will have to
amend your state tax return based on guidance issued by your state but not your federal tax
return because the IRS will automatically adjust your federal tax return. Now I’m talking to talk
about the second question here. Tanaka commented, “TaxAct is saying NOT to file an amended 1040X.”
The 1040X is the federal amended return. So do you have to file a federal amended return?
TaxAct is telling Tanaka he or she does not have to. Why? Because for the majority of Americans who
are expecting refunds for the $10,200 adjustment, the IRS will adjust your return automatically
and send you a refund as a result. The only case where the IRS says you should amend your return
is if the adjustment to your income for the $10,200 would make you eligible for credits
and/or deductions you were not eligible for on your originally-filed tax return. I went over
this back on April 1, but I’ll go over it here as well. So if say on your originally-filed 1040
you were not eligible for the earned income tax credit because your income was too high
with the ten thousand, two hundred included, but now if you take out the ten thousand two hundred
dollars you see in your tax software that you are eligible for the earned income tax credit,
then the IRS is saying you should amend your return. So if you are newly-eligible for a credit
or deduction as a result of this change, making the ten thousand, two hundred dollars non-taxable,
you should amend your return for the IRS. However, if you were originally,
say, eligible for the earned income tax credit on your originally-filed return but now as a
result you are eligible for MORE earned income tax credit, then you don’t have to amend per the IRS.
However, I would say that you should look at your tax software post-adjustment and compare your
previous refund to the new refund, whatever that difference is, to make sure the IRS is refunding
you the correct amount especially if you are eligible for an increased credit or deduction
than you were initially. And in these examples I just used the earned income tax credit because
that’s a popular one, but this same logic applies to other credits and deductions as well. If you’re
still confused as to whether you need to amend your return or not for the $10,200 adjustment,
watch my video from April 1 where I go over the relevant IRS announcement, I’ve linked that video
for you right over here. Alright, folks, that is what I have for you right now, thank you so much
for watching this video, if you have friends who need to hear this information, please share this
video with them, I would really appreciate that, and I will see you in the next video, buh-bye.