Just as the Internal Revenue Service has extended the federal deadline for filers from the standard April 15 to May 17, the American Rescue Plan, which was signed into law by President Joe Biden on March 11, made the first $10,200 of unemployment income tax-free for single filers – or $20,400 for two workers in a married couple filing taxes jointly – with adjusted gross income of less than $150,000 in 2020.
But by the time the law passed, in the middle of tax season, some people who received unemployment income in 2020 had already filed and paid taxes on those benefits.
The IRS is working on a fix that means most people in that situation will not have to take any extra steps, such as sending in an amended tax return, to recoup the taxes they paid but don’t owe per the new rule.
People who had unemployment income in 2020 and have not yet filed their tax return may need to wait to ensure that they submit all information to the IRS correctly.
The agency released new instructions on Friday, including a worksheet for paper filers, and said it would work with online tax programs to update current software.
Dunham Tax Professionals is on it and will report in this blog space, any and all changes to the guidelines as they occur. In the meantime, and as always, we’re here to answer any questions you may have – especially in these uncertain times. Feel free to contact us today.