The passage of the most recent stimulus package —The American Rescue Plan— is good news for most taxpayers. However, particularly for those who received unemployment benefits in the last year, implentation of the bill after the start of tax season is creating some confusion.
Shortly after the president signed the Act, IRS issued a statement indicating that a software update will be installed to address any potential issues with 2020 tax returns. In the meantime, the main takeaways with regard to unemployment are:
- The American Rescue Plan includes a retroactive benefit that will make the first $10,200 of unemployment income from 2020 non-taxable for individuals who earned less than $150,000.
- IRS is urging taxpayers who are eligible for this benefit to delay filing pending the software industry update that will account for the adjustment.
- Taxpayers who have already filed their 2020 returns should also wait to see if an amended return will be necessary.
For our clients who meet the eligibility requirements of the unemployment provision:
- If we have already processed your taxes and it is determined that an amended return is necessary, the update will be filed after April 15th, per IRS guidance.
- If we have your information and/or your documents are in progress, we will be holding your return pending the Federal and State software updates before filing.
- If you have any questions about the unemployment provision in the most recent stimulus, IRS has posted more detailed information here.