EL SEGUNDO, Calif. — Tax season is in full swing, and with it comes many head-scratching moments.
Nearly a year ago, as the coronavirus rooted itself, millions of Americans lost their jobs or were furloughed — forcing them to file for unemployment benefits.
Those unemployment benefits, until recently, were taxable, as many painfully found out when filing their tax returns this year.
When the American Rescue Plan was signed last week by President Joe Biden, it included — a late addition to the bill — an exclusion on some unemployment compensation. That means that those who received unemployment benefits do not have to pay taxes up to $10,200.
However, many Americans who received unemployment benefits in 2020 due to the coronavirus pandemic filed their taxes before the American Rescue Plan's passing and are now unsure what to do. In other cases, some are unsure if they should file or not file at this time.
Navigating the Internal Revenue Service can only add to the frustration and anxiety. So, here is what you need to know.
Did you in 2020 receive unemployment benefits?
If your answer is yes, keep scrolling down. If your answer is no, but you want to check the status of your stimulus check, scroll to the bottom of the article.
In 2020, did you receive unemployment benefits, and was your modified adjusted gross income less than $150,000?
If your answer is yes to both, because of the American Rescue Plan, you do not have to pay tax on unemployment compensation up to $10,200. If you are married, each spouse who received unemployment compensation does not have to pay tax on unemployment compensation up to $10,200.
If you received more than $10,200 in unemployment compensation in 2020, anything above the $10,200 is taxable. If your modified gross income in 2020 was $150,000 or more, you would not be able to exclude any unemployment compensation.
I already filed my taxes. What do I do?
Nothing! An IRS representative told Spectrum News to wait until the IRS issues guidance on what steps to take. Further, the IRS strongly urges taxpayers not to file amended returns to the new legislative provisions — like the new exclusion of up to $10,200 of unemployment compensation.
I have not filed my taxes yet. What do I do?
For those who have not filed their taxes, the IRS is providing a worksheet for paper filers and is working with the software industry — think TurboTax — to update current tax software so you can determine how to report your unemployment income in your 2020 tax return.
If you are in no rush, you can wait until the IRS issues its guidance, and there is no date as to when that would happen.
Where is my stimulus check?
As of Wednesday, the IRS said it had distributed, in its first batch, 90 million payments — or more than $242 billion to Americans. These were direct deposit payments.
The Treasury has mailed roughly 150,000 checks worth about $442 million.
The IRS also reported that more than 35 million people had received their stimulus payment status through the "Get My Payment" tool on IRS.gov.
The IRS is delaying the traditional tax filing deadline from April 15 until May 17.