$10,200 in unemployment benefits won't be taxed thanks to American Rescue Plan

[MULTIZ321]

$10,200 in unemployment benefits won't be taxed thanks to American Rescue Plan.

$10,200 in unemployment benefits won't be taxed, leading to confusion amid tax-filing season

The IRS has extended the filing deadline, but has yet to issue rules for workers who received unemployment benefits.

www.cbsnews.com

Richard

 

[Ralph Sir Edward]

I'll get $2,200 back. (I'm in the 22% marginal bracket for 2020).

 

[rpeacock]

I'll get $2,200 back. (I'm in the 22% marginal bracket for 2020).

So you're giving back 22% of the free money you received from the stimulus?

Sent from my SM-G955U using Tapatalk

 

[emeryjre]

The information that was provided in the original post talks about unemployment insurance payments. Under the new stimulus bill, the first $10,200 of unemployment insurance payments in 2020 will not be subject to federal taxes. This is a change in the law. Prior to the change, the UI payments were subject to federal taxes. This change will result in a lower federal taxes owed for 2020.

So if a person has already filed their taxes for 2020, they will be entitled to receive a refund of some of the taxes they have already paid. (How that will work is still being evaluated).

The change is part of the stimulus bill, but does not involve stimulus payments.

 

[Ralph Sir Edward]

So you're giving back 22% of the free money you received from the stimulus?

Sent from my SM-G955U using Tapatalk

No, I'm keeping $2,200 more than I would otherwise.

 

[b2bailey]

The information that was provided in the original post talks about unemployment insurance payments. Under the new stimulus bill, the first $10,200 of unemployment insurance payments in 2020 will not be subject to federal taxes. This is a change in the law. Prior to the change, the UI payments were subject to federal taxes. This change will result in a lower federal taxes owed for 2020.

So if a person has already filed their taxes for 2020, they will be entitled to receive a refund of some of the taxes they have already paid. (How that will work is still being evaluated).

The change is part of the stimulus bill, but does not involve stimulus payments.

For my granddaughter, I am thrilled with this change. Her CPA mother, not so much. Will it require an amended return for each client affected?

 

[stmartinfan]

It will be interesting to see how quickly this shows up in the tax softwares. My husband was entering my daughter's tax info in the free TurboTax online yesterday and it was still taxing her unemployment. We'll have to check periodically to see when the tax gets removed and then actually file her tax return. I figured they deserved more than a day to update!

 

[Ralph Sir Edward]

It will be whole lot easier to file for an extension while waiting for the "dust" to settle out. . .

 

[controller1]

So you're giving back 22% of the free money you received from the stimulus?

Sent from my SM-G955U using Tapatalk

Unemployment benefits is what is being addressed, not the stimulus payments which have been tax-free to the recipient since Day 1.

 

[controller1]

It will be interesting to see how quickly this shows up in the tax softwares. My husband was entering my daughter's tax info in the free TurboTax online yesterday and it was still taxing her unemployment. We'll have to check periodically to see when the tax gets removed and then actually file her tax return. I figured they deserved more than a day to update!

That may take some time since the IRS has to decide how it is to be handled. In all likelihood we could be staring at the April 15th filing deadline with the IRS still trying to make a decision. Their plate is a little full with the administration of the stimulus payments coupled with a reduced workforce due to Covid. And now Congress has thrown in a retroactive tax change!

 

[jackio]

I was assuming we will have to file an amended return. We filed already, and our refund has been received. Turnaround time e-filing to deposit in our checking account was one week!

 

[SmithOp]

This is the latest from IRS, I’ve heard April 1st before we see any software updates or guidance. We are holding returns with UI so we don’t have to do amendments later.


March 12, 2021

The IRS is reviewing implementation plans for the newly enacted American Rescue Plan Act of 2021. Additional information about a new round of Economic Impact Payments, the expanded Child Tax Credit, including advance payments of the Child Tax Credit, and other tax provisions will be made available as soon as possible on IRS.gov. The IRS strongly urges taxpayers to not file amended returns related to the new legislative provisions or take other unnecessary steps at this time.

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. 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. 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.

 

[mjm1]

This will not apply for married couples with adjusted gross income of $150,000 or more. From what I have seen that same level of AGI applies to individuals too.

Best regards.

Mike

 

[SmithOp]

MFJ with AGI under $150k will get to exclude double, $20,400.

 

[jackio]

MFJ with AGI under $150k will get to exclude double, $20,400.

Would that be even if only one person received the unemployment benefits?

 

[SmithOp]

Would that be even if only one person received the unemployment benefits?

No, both would have to have collected UI. If one was less than $10,200 then the exclusion is reduced to only cover the amount collected.

 

[Talent312]

I predict --
They'll produce a new form or worksheet that's 30 lines long, with stupefying instructions.

 

[SmithOp]

I predict --
They'll produce a new form or worksheet that's 30 lines long, with stupefying instructions.

So far I’ve only seen instruction to place a negative amount on Other Income, but they managed to make that sound complicated.

Exclusion of up to $10,200 of Unemployment Compensation for Tax Year 2020 Only | Internal Revenue Service

If your modified adjusted gross income (AGI) is less than $150,000, the American Rescue Plan Act enacted on March 11, 2021, allows you to exclude from income up to $10,200 of unemployment compensation paid in 2020. This means you don’t have to pay tax on unemployment compensation of up to...

www.irs.gov

This is not working in the software we use, it affects taxable SS and other credits, plus CA returns already exclude UI so this doubles it.

 

[MULTIZ321]

How to Claim Your $10,200 Unemployment Tax Break.

How to Claim Your $10,200 Unemployment Tax Break

A provision in the American Rescue Plan waives owed taxes for up to $10,200 of your unemployment insurance, but it’s creating a lot of confusion as the tax break only just passed in the middle of tax season. Here’s what you should do to claim it— even if you’ve already filed your 2020 tax return...

twocents.lifehacker.com

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Richard

 

[Patri]

Wow. I had UC last year but only brought my taxes in last week. Hope my preparer knows this.

 

[MrockStar]

Wow. I had UC last year but only brought my taxes in last week. Hope my preparer knows this.

They gave us a one month extension to file . Hope it helps you.