IRS Just Made More People Eligible For Unemployment Benefit Tax Relief
The recently signed $ 1.9 trillion coronavirus relief bill is doing a lot of good things for unemployed workers. On the one hand, it puts stimulus checks in their pockets. Many of those direct payments of $ 1,400 have already gone to many bank accounts. In addition, the bill provides for a weekly increase of $ 300 in unemployment benefits and extends these benefits until the beginning of September. Finally, the bill allows $ 10,200 in unemployment income to be exempt from federal taxes.
Normally, unemployment benefits are taxable, and recipients can have this tax withheld from the start or pay their tax bills when they file their annual returns. Avoiding taxes on $ 10,200 in unemployment benefits puts a lot more money in the pockets of millions of people.
However, this unemployment income exemption has a catch: it only applies to people who earned less than $ 150,000 in 2020. But now the IRS is making it easier for some unemployed people to take advantage of this tax break. .
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Unemployment income will not be considered income
Originally, all unemployment benefits received in 2020 were counted for income purposes. So if someone were to earn $ 140,000 from a job and $ 14,000 from unemployment, that person would go over the limit of $ 150,000 and not get the aforementioned tax exemption. Now the IRS says unemployed people don’t have to count their unemployment benefits when calculating their 2020 income. And this change could help more people fall below the $ 150,000 threshold to qualify for a benefit. tax-exempt treatment of $ 10,200 in unemployment benefits.
Of course, some might argue that not everyone on the verge of making $ 150,000 needs tax relief. But in some parts of the country, an income of $ 150,000 does not go as far as you might expect. As such, this extra flexibility on the part of the IRS could help a lot of people, even those with incomes that fall into the moderate to high category.
The IRS also recently announced that tax filers who have submitted their 2020 tax returns without considering a tax exemption on $ 10,200 in unemployment benefits do not need to file an amended return. Instead, the agency will attempt to automatically adjust the refunds.
The IRS also extended the tax filing deadline from April 15 to May 17 in light of changes to the relief bill. This extra month allows tax preparers to reconcile the new rules and gives tax filers increased flexibility in these constantly uncertain times.
That said, tax filers who can have their tax returns completed before May 17 should do so. Most people who file taxes need to be reimbursed, and the earlier the returns are sent, the sooner the IRS can process those payments. The agency hasn’t said anything about the late repayments this year, but given it’s busy handing out stimulus payments, it wouldn’t hurt tax filers to put their tax returns in that queue. waiting for reimbursement.