Monday, April 19, 2021
Are you one of those people who likes to get your income tax returns out of the way early on? If you are and have reported Unemployment Benefit as taxable income, Congress decided to make a retrospective amendment to the tax law for 2020 in March 2021 to make the first $ 10,200 in Unemployment Benefit tax-free. Help is on the way.
IRS just released its plans to automatically refund overpaid taxes on your 2020 tax return without you having to file an amended tax return. Isn’t that just valuable? (A little southern jargon that implies a bit of sarcasm.)
So what do you do if you filed a taxable unemployment benefit early and ended up paying tax on it? NOTHING. The IRS has your back. (Do you feel good knowing this?) The IRS claims it will be issuing automatic refunds for the now apparently overpaid tax starting in May.
While I am on the subject, just a summary. In March 2021, in its usual late-night and disorganized fashion, Congress passed a bill that retrospectively amended the tax bill for 2020. In the middle of the 2020 registration season.
The IRS was overflowing with tax returns etc received and suddenly had to stop, reprogram their software, work with third party software companies (like Turbo Tax etc) to update their software, and at the same time give new economic impetus to checks to everyone in the country. All with only 60% of their workforce. (The rest of them still have to return to work due to the VID.) For once, I even felt sorry for the IRS.
In general, households with adjusted gross income of $ 150,000 or less will NOT be taxable on the first $ 10,200 in unemployment benefits received in 2020. IRS has since made it clear that this limit is the same for married couples ($ 150,000), but now up to $ 20,400 in unemployment benefits is NOT taxable. (Hooray. At least they tried to do the right thing and found a way to partially unravel the marriage clause mess that Congress originally put into the law.)
If you haven’t filed your tax return yet, you have until May 17th to do so. You should reduce your taxable income appropriately by the non-taxable portion of unemployment that you received.
Have you heard? Psalm 60:11 says: “Give us help against the adversary, for man’s help is vain.”
Kelly Bullis is a Chartered Accountant based in Carson City. Contact him at 882-4459. On the Internet at BullisAndCo.com Also on Facebook.