IRS To Help Those With Unemployment Benefits

Being unemployed has its drawbacks, but unemployment during a pandemic is difficult on a whole new level. Aware of this, the US President recently signed off on a bill to provide some additional tax relief for the unemployed.

Over 23 million US workers filed for unemployment in 2020, and 40 million collected unemployment benefits. Last year also marked the first time self-employed workers could qualify for unemployment benefits.

The 2021 tax filing season took off on February 12th and will last until May 17th. Americans started filing their various tax returns (consumption taxes, property taxes, VAT, etc.), and among them were those who featured unemployment benefits on their tax return. However, in the meantime, some changes were made.

On March 11th, a month after the tax season started, Biden signed a $1.9 trillion COVID-19 relief bill—the American Rescue Plan. The bill includes a provision making the first $10,200 of unemployment compensation nontaxable for each taxpayer who made less than $150,000 in 2020. As for married people, if one spouse received unemployment benefits, both parties can exclude compensation up to $10,200, so the maximum a married couple can exclude is $20,400.

Who Does This Refer to and What Should You Do?

Since the bill was signed after the start of tax season, many people had already filed their returns beforehand. However, this doesn’t mean they will be excluded from the tax break. The Internal Revenue Service (IRS) is actively working on recalculating and readjusting tax returns for those who became newly eligible for the latest tax break, even if they’ve already filed their taxes.

The recalculation will be done in two phases—the first phase will focus on taxpayers eligible to exclude up to $10,200, and the second phase on married couples filing jointly, who are eligible to exclude up to $20,400 as well as other more complex returns.

The refunds are expected to start arriving in May and continue into the summer. The IRS states that the money will be refunded automatically without the taxpayers doing anything. Still, taxpayers should file an amended return if the new tax law has made them eligible for additional federal tax credits or deductions that weren’t filed in their original report. Reviewing their state tax returns is also a good idea.

Naturally, the changes also apply to those who haven’t filed their taxes yet. Starting in March, instructions and an updated worksheet have been available on irs.gov/form1040 to help them file their returns correctly.

ABOUT AUTHOR

My eyes rarely take a break from staring at my laptop's screen—I am Big Brother, scanning the web for news and information worth sharing. Full transparency—a substantial chunk of my screentime is also dedicated to watching TV shows, but balance is key, right? Writing is how I choose to share my findings with the world while keeping my love of language and creativity alive.

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