The IRS is focusing on sending out the third round of Economic Impact Payments as quickly as possible.
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IRS and Treasury officials said during a press conference Monday that this statement was still operable, but they're working on further guidance for taxpayers who have already filed tax returns under the assumption that the full unemployment benefits were taxable before the $10,200 exclusion was signed into law as part of the American Rescue Plan. For those who received unemployment benefits last year and have already filed their 2020 tax return, the IRS emphasizes they should not file an amended return at this time, until the IRS issues additional guidance."
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For those who haven't filed yet, the IRS will provide a worksheet for paper filers and work with software industry to update current tax software so that taxpayers can determine how to report their unemployment income on their 2020 tax return. "The IRS will provide taxpayers with additional guidance on those provisions that could affect their 2020 tax return, including the retroactive provision that makes the first $10,200 of 2020 unemployment benefits nontaxable. Department of Labor estimates that more than 18 million Americans are still receiving some form of unemployment benefits."The IRS strongly urges taxpayers to not file amended returns related to the new legislative provisions or take other unnecessary steps at this time," said the IRS in a separate statement Friday.
ARRA included up to $2,400 in tax relief to cover unemployment benefits that were provided during the last recession. This provision is based on similar tax relief that was provided in the 2009 American Recovery and Reinvestment Act ( ARRA). This amounts to as much as $1,020 in tax forgiveness for unemployment claimants, assuming a 10 percent tax rate. The $10,200 of tax relief provided in this bill would cover 17 weeks of that $600 per week benefit. The CARES Act, passed by Congress in March 2020, provided an additional $600 in unemployment benefits through the end of July. “This commonsense fix that Senator Durbin and I introduced last month will protect families, promote economic stability, and ensure that the additional benefits that we provided through the CARES Act last year stay in the pockets of those in need instead of on their tax bills.” “This is fantastic news for the millions of Americans and thousands of Iowans who faced a surprise tax bill on the unemployment benefits they utilized last year to keep a roof over their heads and food on their table,” said Rep. Axne, which allows Illinoisans to focus their UI benefits on covering essentials during the pandemic,” Durbin said. I’m pleased that the Senate passed this measure I worked on with Rep. “The inclusion of our provision is welcome news to the millions of Americans using unemployment benefits to keep a roof over their head, put food on the table, and pay for health care and other necessities. The tax relief would extend to both workers who received benefits through federal unemployment programs like Pandemic Unemployment Assistance (PUA) and Pandemic Emergency Unemployment Compensation (PEUC) as well as those who received traditional benefits through their state unemployment insurance fund. The provision, based on Durbin’s and Axne’s Coronavirus Unemployment Benefits Tax Relief Act, would waive federal income taxes on the first $10,200 of unemployment benefits received in 2020 for households earning less than $150,000. Representative Cindy Axne (D-IA-03) announced that a provision to provide tax relief for Americans who lost their jobs and utilized unemployment benefits last year will be included in the American Rescue Plan. Senate Majority Whip Dick Durbin (D-IL) and U.S.
03.06.21 Durbin, Axne Announce Their Provision to Provide Tax Relief for Unemployed Americans Included in American Rescue Plan Durbin, Axne authored provision removes taxes on up to $10,200 in unemployment aid for 2020 tax filing
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