Do you need to amend your 2020 return?
Congress amended the tax code in March to exempt $10,200 ($20,400 for a couple) of unemployment from taxable income (only for those with adjusted gross income less than $150,000 before the unemployment income). By the time the IRS implemented the change, which was retroactive for 2020, many had already filed their tax return.
The IRS has since come out and said not to worry; they will review previously filed returns and issue refunds beginning in May if taxes were paid on unemployment benefits (up to the $10,200/20,400 limits). However, it may still be beneficial to file an amended return.
While the IRS will refund federal taxes that were paid on the unemployment, it will not recalculate any changes for tax deductions or credits that you might now qualify for after your adjusted gross income is reduced. (It will recalculate credits if they were on your original return, but if you didn’t qualify on the original return, but now you do, you need to file an amended return.) The credits include the Earned Income Credit, college credits, etc.
You may also need to file an amended return to receive a refund from your state. You need to first check to see if your state is offering the same exemption (13 states have not done so).