As the legislature entered its final days, Indiana lawmakers were especially proud of themselves for providing record funding for education.
As we all know, or at least should, that record increase in funding came from the American Rescue Plan, a law of Congress signed by President Joe Biden and unsupported by Republicans. It was the bill that allocated nearly $ 2 trillion to a variety of programs, including $ 1,400 for stimulus checks and billions of dollars for state and local authorities.
Like all other states, Indiana received enormous gusts of wind. Indiana went cashless, and the legislature used that money to support programs.
Happy days in Indianapolis.
Unfortunately, our lawmakers have decided that the windfall will not be shared with those unlucky enough to lose their jobs for any reason in 2020, but most likely due to the economic downturn caused by the COVID-19 pandemic. This means that people who have received unemployment benefits through standard and ancillary programs under the Coronavirus Aid, Relief and Economic Security Act – approved by Congress and signed by President Donald Trump last year – will not receive the same treatment under Indiana tax law received as with the federal tax law.
Indiana Unemployment Compensation is a 2020 taxable income, but is not a federal tax return for most workers.
If your Modified Adjusted Gross Income is less than $ 150,000, the U.S. rescue plan, which went into effect on March 11, excludes income up to $ 10,200 in Unemployment Benefit paid in 2020. That means you don’t have to pay any unemployment benefit taxes of up to $ 10,200. Information from the IRS says.
On April 22nd, Legislature passed an update to Indiana compliance with the Internal Revenue Code, which was expressly decoupled from certain provisions of the Code, and Governor Eric Holcomb signed it on April 29th.
As a result, you cannot apply the same federal unemployment benefit exclusion on your Indiana 2020 individual income tax return, and that income will need to be added back on. However, you may be entitled to a deduction that can reduce or even eliminate the state tax due on your unemployment benefit.
For Indiana taxpayers, this means some individuals who have sought a refund of their taxes will now have to pay additional state income taxes.
With the billions flowing into the state’s paperback, legislation should have found it in their collective hearts to give the less fortunate a break. Unfortunately, many people have argued that people purposely became unemployed in order to get unemployment checks plus the extra $ 600 per week under the CARES Act and the $ 300 per week under the American bailout plan.
While some people choose to remain unemployed, a person cannot simply become unemployed voluntarily. There are rules to follow in order to receive benefits.
In Indiana, employment is recovering near pre-pandemic levels. We’re not there, but we’re getting there. Reports released on Friday estimated that employment growth this year could result in US unemployment as low as 4.3% by the end of the year.
The stimulus checks and the extra unemployment benefits have been extremely helpful to individuals and the economy, but they don’t mean people have gone cashless. Taxing unemployment at a time when Indiana and America are recovering from a severe economic downturn is not a positive move.
This legislative period has left many observers scratching their heads in amazement at certain decisions. This is another one.
OUR VIEW is written alternately by Grace Housholder, Dave Kurtz, Michael Marturello and Steve Garbacz. We welcome comments from readers.