The IRS will waive taxes on up to $10,200 of unemployment benefits received in 2020 per person and will automatically issue refunds starting in May. Meanwhile, unemployment rises again as nearly 750,000 Americans file.
American Rescue Plan Will Help Out Unemployed Taxpayers
The American Rescue Plan contained a provision that waives federal tax on up to $10,200 of unemployment benefits collected in 2020, per person, as part of the relief bill President Joe Biden signed on March 11. However, many people who were eligible for the tax relief had already filed their tax returns before then, CNBC reported.
On Wednesday, the IRS announced that it will automatically issue refunds to these taxpayers beginning in May. The refund payments will continue into the summer months. Households that earned $150,000 or more in 2020 will not be eligible for the tax relief or refund.
The IRS plans to recalculate refunds into phases for those who have already filed their taxes. First, they will review single filers who are eligible for the refund on up to $10,200 of unemployment benefits. Second, they will review filers of joint returns who are eligible for the refund on up to $20,400 of unemployment benefits, as well as others who file more complex tax returns.
Don’t File an Amended Return
The IRS is advising taxpayers who had already filed prior to President Biden signing the bill on March 11 not to file an amended return. The IRS is automatically issuing refunds to eligible taxpayers making filing an amended return unnecessary.
“Because the change occurred after some people filed their taxes, the IRS will take steps in the spring and summer to make the appropriate change to their return, which may result in a refund,” the IRS said in a statement.” The first refunds are expected to be made in May and will continue into the summer.”
State Taxes Not Covered
The refunds are only for federal returns. The tax cut does not include state taxes or any monies workers may oh on their benefits. This week, more than a dozen states said they aren’t offering a tax break on unemployment benefits, CNBC reported.
Jobless Claims Rise Again
The number of Americans filing for first-time unemployment benefits rose again last week, increasing to 719,000 for the week ending March 27, according to data from the Labor Department released on Thursday, Bloomberg reported.
The number represents an increase of 61,000 in joblessness from the previous week. Even as the lockdown situation improves in some areas, the labor market is still struggling to inch its way toward a full economic recovery.
Experts predict that even with restrictions easing, it will still take time to recoup the millions of jobs lost. However, they do suggest that employment will begin to accelerate in the coming months.
