The headquarters of the Internal Revenue Service (IRS) in Washington, DC
Samuel Corum / Bloomberg via Getty Images
Unemployed Americans should wait to file an amended tax return to receive a new unemployment benefit tax break that was received last year, the IRS said Friday.
The American Rescue Plan Act of 2021, which President Joe Biden signed Thursday, waives federal taxes on up to $ 10,200 in unemployment benefits for single adults who earned less than $ 150,000 a year in 2020. (The limit is $ 20,400 for two workers in a married couple.)
Amounts over $ 10,200 will still be taxable. States may also choose not to offer the tax break.
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Those who filed a tax return before the $ 1.9 trillion Covid relief measure went into effect should wait for the IRS to release additional information, the agency said.
“For those who received unemployment benefits last year and have already filed their 2020 tax return, the IRS stresses that they should not file an amended declaration at this point until the IRS issues additional guidance,” the IRS said on Friday.
The IRS received nearly 56 million returns and processed nearly 49 million on March 5, according to the agency.
According to the Century Foundation, around 40 million people received unemployment benefits last year. The average person received $ 14,000 in assistance.
A hold pattern could put some workers in a tough spot, especially those who paid a heavy tax burden for their unemployment benefits and are now trying to figure out how to get the funds back, said Janet Holtzblatt, senior fellow at the Urban-Brookings Tax Policy Center.
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The IRS also issued tax return instructions on Friday for those who hadn’t filed a tax return.
“For those who have not yet filed, the IRS will provide a paper filing worksheet and work with the software industry to update current tax software so taxpayers can determine how to report their unemployment income on their 2020 tax returns.” said the IRS.
The 2020 tax return is one month away on April 15th.