The IRS announced Thursday it would be sending out more tax refund checks. This includes taxpayers who filed for unemployment benefits in 2020.
Additionally, the tax refund is for those who filed before President Joe Biden signed his $1.9 trillion COVID relief bill.
Biden’s American Rescue Plan aimed at alleviating financial difficulties suffered due to the effects of the COVID pandemic.
The first round of tax relief checks were distributed in May, with plans to continue distribution through the end of summer.
The tax refund exemption is intended for individual taxpayers who made less than $150,000. For individuals, that amount goes up to $10,200. For married couples, the exemption would reach up to $20,400. The exclusion only applies to federal taxes. However, states may individually decide how to address the issue.
Any amount above the allocated $10,200 is subject to taxes.
The IRS breaks it down
“If your modified adjusted gross income is less than $150,000, the American Rescue Plan enacted on March 11, 2021, excludes from income up to $10,200 of unemployment compensation paid in 2020, which means you don’t have to pay tax on unemployment compensation of up to $10,200,” The IRS states on its website… Amounts over $10,200 for each individual are still taxable.”
Americans who have already filed do not need to take any additional steps. The IRS will adjust tax returns for anyone who is eligible to receive the tax break.
However, those who have not filed but are eligible, need report the adjusted income on their Form 1040. The IRS can correctly identify the proper figures.
Americans Affected by Unemployment: How the Tax Refund is hHlping
While unemployment benefits are considered to be taxable income, the “exclusion” is part of Biden’s new tax break. The goal is to help Americans recover financially. Moreover, the break should boost the economy.
Interestingly, some 10 to 13 million Americans are included in the change in exclusions, The Sun reported.
About 40 million people received unemployment benefits in 2020, according to CNBC. The average assistance for an individual was $14,000.
Furthermore, more than 20 million American jobs were lost. This number parallels The Great Depression.
Americans affected by this change are not able to track their funds. However, they should receive a letter in the mail from the IRS stating the change within 30 days of the correction.
After an economically tough year, the job market is beginning to stabilize. The unemployment rate has dropped another half percent in July to 5.4 percent.