Income Tax Credit, Unemployment Benefits: What to Know Before Filing Your Taxes

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Some taxpayers could be in for a bigger return this year, but as the coronavirus pandemic changed financial situations for so many, there are some things you should know before filing in Illinois.

Here's a breakdown:

Earned Income Tax Credit

The federal Earned Income Tax Credit (EITC) and its Illinois counterpart, the Illinois Earned Income Credit (EIC) could bring bigger returns for eligible filers in the state. But you'll need to claim it on your tax return in order to get it.

The Illinois Department of Revenue issued a reminder to residents that the credits "are powerful tools that reward low- and moderate-income taxpayers for their hard work, yet thousands of eligible taxpayers fail to claim this refundable credit on their taxes."

“I encourage taxpayers to check their eligibility for the state EIC and federal EITC,” David Harris, director for the Illinois Department of Revenue, said in a statement. “The earned income credit puts thousands of dollars in the pockets of hard-working families every year. Even if an individual does not owe any tax, they may be eligible. That’s money that can be used for groceries, rent, utilities and other bills.”

The refundable credit is worth up to 18% of federal claims, for those who are eligible.

Still, in 2020, more than 13,000 Illinoisans claimed the federal credit, but failed to claim the state's version. According to the IDOR, $7 million was left unclaimed last year alone.

To be eligible, taxpayers have to meet income and residency qualifications and file a tax return, even if they don't owe taxes or are not required to file.

According to the IDOR, the earned income tax credit can mean up to a $6,660 refund when a taxpayer files a return with qualifying children. Workers without a qualifying child could be eligible for a smaller credit up to $538. According to the Internal Revenue Service, the average amount credited for 2020 was $2,461.

To find out if your family qualifies for the credit, click here.

What to Do if You Received Unemployment Benefits?

Those who received unemployment insurance benefits in 2020 can use what's called 1099-G tax form, recently released by the Illinois Department of Employment Security.

Those who collected benefits in 2020 need the form to complete both state and federal tax returns.

"The form is necessary for individuals who received state or federal UI benefits," according to IDES. "This includes claimants who received regular UI benefits and/or benefits under the new federal pandemic relief programs, including Pandemic Unemployment Assistance (PUA), Federal Pandemic Unemployment Compensation (FPUC), Pandemic Emergency Unemployment Compensation (PEUC), Lost Wages Assistance (LWA), and state Extended Benefits (EB)."

The forms are available electronically for those who requested it or via a paper form in the mail. They can also be found and printed off IDES website (login required). 

Anyone with questions about the form is urged to contact IDES at (800) 244-5631.

What if I Received a 1099-G Tax Form But Did Not Received Unemployment Benefits?

Anyone who did not apply for or receive UI benefits in 2020 but received a 1099-G tax form from IDES is asked to "immediately contact the department at (800) 244-5631." 

"Receiving this form without having applied for or received unemployment benefits is an indication of identity theft and that a fraudulent claim was filed using the personally identifying information of an individual," IDES stated. "This PII was obtained through prior large-scale data breaches and cyber hacks...and is now being used by organized crime and fraudsters to illegally file for UI benefits and defraud state unemployment systems."

After fraudulent activity has been reported, the department will launch an investigation and work with residents to get them a corrected form, IDES said.

"Victims of identity theft will not be held responsible for repaying any benefits that may have been administered in their name by fraudsters, nor will they be held responsible for tax implications resulting from a fraudulent claim," the department states. 

As of late last month, IDES reported it had stopped more than 962,000 fraudulent unemployment claims since March 1, 2020.

Residents are urged to enhance the safety of their personal information and cyber security where possible and "never willingly share personal information online or under suspicious circumstances," IDES warned. 

More information about unemployment fraud and how to protect your PII can be found on the IDES website.

Illinois Tax Filing Season Starts on Feb. 12

The Illinois Department of Revenue says it will begin accepting 2020 state individual income tax returns on Feb. 12, the same date that the Internal Revenue Service begins accepting federal individual income tax returns.

Taxpayers who submit error-free forms electronically are expected to receive a direct deposit refund in four to six weeks, if applicable, the department reported.

“Filing tax returns electronically and requesting direct deposit is still the fastest way for taxpayers to receive a refund,” IDOR Director David Harris said in a statement. “As the COVID-19 pandemic continues, I also encourage taxpayers to create a MyTax Illinois account. With a MyTax Illinois account, taxpayers will be able to respond to any filing inquiries from the department electronically, resulting in faster processing and issuance of owed refunds.”  

The 2020 tax filing deadline is scheduled for April 15.

For the most up-to-date information, forms, schedules, and instructions for the 2020 tax year, click here.

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