[javascript protected email address] | Phone: 707-238-2281 | www.numer1cal.com

ALERT! Some Unemployment Income Now Tax Free for 2020

What you need to know

ALERT! Some Unemployment Income Now Tax Free for 2020 Image

A surprise tax break for 2020 was passed into law in March of 2021. It may impact your situation if you received unemployment income this past year. This will mean filing amended tax returns for some and a delay in preparing your tax return for others.

Background

Unemployment compensation was received by millions of Americans during the pandemic.

But there’s a Catch 22 with unemployment compensation. While it’s welcome income during a tough time if you’ve lost your job, it’s also classified as taxable income to be reported on your tax return.

The recently passed American Rescue Plan now makes part of your unemployment benefits free from federal taxation. Specifically, the first $10,200 of 2020 unemployment compensation is now tax free. Depending on your tax bracket, this tax break could mean $1,200 or more in taxes saved on your 2020 return.

The problem

The new legislation which contains this tax break unfortunately didn’t become law until March of 2021, a full three months after the end of the tax year and after millions of Americans had already filed their 2020 tax return! And to make matters worse, the IRS has been given no time to figure out how this tax break will be reported on your 2020 tax return.

Understanding your situation

If you received unemployment compensation in 2020, here’s what you need to know:

  • If you’ve already filed your 2020 tax return: Wait for further instructions. Lawmakers are currently asking the IRS if it’s possible to automatically make adjustments and issue a refund if you’ve already filed your 2020 return. Issuing an automatic refund will also avoid the need to file an amended tax return. So there is no need to call, we can only wait for clarification.
  • If you HAVE NOT filed your 2020 tax return: Filing your tax return will be delayed until guidance is received from the IRS and it is deployed into tax filing software. It’s unclear when the IRS will issue this guidance. Once this guidance is received, delayed tax filings can proceed. In the meantime DO NOT delay turning in your tax information as returns can still be prepared and be ready to be filed once IRS guidance is received.

Be assured you will be informed once the IRS issues further instruction on how to claim your tax break. In the meantime, enjoy the extra tax savings you’ll get sometime in the near future!

Last updated: 05/18/2022

Have questions? Contact us.

#Numer1cal
3558 Round Barn Blvd Ste 200 | Santa Rosa, CA 95403
www.numer1cal.com | [javascript protected email address]
Phone: 707-238-2281

FacebookGoogle Business
© 2024 | Terms of use

#Numer1cal COVID-19 Tax Resource Portal

Terms of Service

The Covid-19 Tax Resource Portal (herein after referred to as "Site") is made available as a service to our clients and others for informational purposes only. These materials and information should not be considered as, or a substitute for, accounting, tax or financial advice. While it is hoped the materials provided here are helpful as background material, it is not warranted either expressly or implied as accurate or complete. You should refrain in taking any action based upon the information provided here until you have received proper counsel.

In addition, you understand that any links to any other web site or services does not constitute endorsement of or warranty of any service, product or information provided on their site(s). These links are provided for convenience only.

While our intent is to make transmissions to and from this web site secure, it is understood that no warranty of security can be made and that unforeseen security breaches by "hackers" is a possibility, however slight.

Reproduction of part or all of the contents on this site in any form is prohibited other than for individual use only. All content on this site is copyright protected and/or trademarked as appropriate and may not be copied, duplicated or altered in any way.

In no event shall #Numer1cal, its affiliates or suppliers of any content on this site be liable for any indirect, incidental, special, punitive damages or consequential damages of any kind, or any damages whatsoever arising out of or related to your use of the Site, the content and other information obtained therein.

IF YOU DO NOT AGREE TO THE TERMS OF SERVICE, IMMEDIATELY STOP ACCESSING THIS SITE.

© 2020 - 2024. All Rights Reserved.

Close window