Proposed legislation introduced this week would remove taxes on up to $10,200 in unemployment aid for the 2020 tax filing year.
The proposed bill would waive federal income taxes on the first $10,200 of unemployment benefits that Americans received in 2020. It would apply not only to those who received traditional unemployment benefits through their state unemployment insurance program, but also to those who received benefits through federal unemployment programs such as Pandemic Unemployment Assistance (PUA) and Pandemic Emergency Unemployment Compensation (PEUC).
The Top for things you should know:
1. The first $10,200 would be non-taxable.
2. This will apply to all unemployment.
3. This is only for 2020.
4. If you have filed your taxes, you can amend your taxes to get your money back. (If you file an amendment it would cost your and the money will not come as fast as your tax return)
Why only $10,200 Why not all of it?
The $10,200 exemption amount is intended to cover 17 weeks of the extra $600 federal unemployment benefit that was passed as part of the Cares Act and ran from March to the end of July 2020.
How will it work?
We are not sure but if we look at the past, in 2009 this was done with $2,400 and it was per taxpayer. So, a husband and wife would exclude $4,800. We feel it would work the same way; well, we hope it will.
Should I amend my return now?
It is not going to be cheap. And when it is done the money will not come quick. It will be best to wait for after the tax season, you may be able to pay a lower cost and most accountants will have more time to make sure it is done correctly. Also, if we notice that you can get even more money back due to the fact you now qualify for additional tax credits, we have to supply a lot of proof for the IRS. Think about it as if you had to audit yourself and IRS had to review your self-audit. As you can see waiting till after the tax season, if you can will be the best option. But do not hold your breath on the refund for it will take up to 6-9 months to get the money if all is good in the world.