by Maurie Backman | April 11, 2021
The Ascent is reader-supported: we may earn a commission from offers on this page. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation. Terms may apply to offers listed on this page.
Good news -- if you filed your 2020 taxes without claiming a tax break on your unemployment income, the IRS will take care of it for you.
The recently passed $1.9 trillion coronavirus relief bill contains a host of provisions designed to throw struggling Americans a bone. These include $1,400 stimulus checks, enhanced health insurance subsidies, and boosted unemployment benefits.
Not only will jobless workers be entitled to a $300 weekly unemployment boost through early September, but they'll also get a nice break on their taxes. Normally, all unemployment income is taxable at the federal level, but the new relief bill exempts jobless workers' first $10,200 in benefits for those earning less than $150,000.
Getting out of paying taxes on $10,200 of income can be a good thing. The problem, however, is that the relief bill wasn't signed into law until the middle of March. At that point, a lot of people had already filed their 2020 taxes -- without accounting for this new provision. Originally, some tax professionals thought filers in this situation would need to submit an amended tax return. But now, the IRS says it should be equipped to handle adjustments to tax returns relating to this exemption on its own. And that could save those who already submitted their taxes a lot of time and hassle.
Get free access to the select products we use to help us conquer our money goals. These fully-vetted picks could be the solution to help increase your credit score, to invest more profitably, to build an emergency fund, and much more.
By submitting your email address, you consent to us sending you money tips along with products and services that we think might interest you. You can unsubscribe at any time. Please read our Privacy Statement and Terms & Conditions.
Last week, the IRS released filing instructions for workers who are eligible to claim a tax break on their unemployment income, including a worksheet for filers who submit a paper return. The agency is also working with tax software providers to update their systems to allow for that tax break.
Meanwhile, those who paid taxes on last year's unemployment income and already filed their tax returns may be able to just sit back and wait for their refunds to hit. Normally, the IRS issues refunds for electronically filed returns within three weeks. (Refunds for paper returns can take twice as long.) Adjusting for this change might push back some refunds, but it'll also eliminate the headache of having to file amended returns.
The IRS has also moved the tax-filing deadline back one month, so filers now have until May 17 instead of April 15 to submit their returns without facing penalties for being late. Last year, the IRS moved the filing deadline back three months in response to the coronavirus pandemic, but this year, the agency wasn't planning to adjust that deadline at all. Once the new stimulus package was passed, however, it became clear that it came with tax implications. While this wasn't the bill's intent, it did end up buying Americans relief on the tax-filing front as well.
That said, those who are due a refund for 2020 should file their taxes as soon as they're ready. That way, they can get that money into their bank accounts sooner. This especially applies to people who never got a stimulus payment in 2020 and will be claiming stimulus money on their tax returns via the Recovery Rebate Credit.
If you have credit card debt, transferring it to this top balance transfer card can allow you to pay 0% interest into late 2022! Plus, you’ll pay no annual fee. Those are just a few reasons why our experts rate this card as a top pick to help get control of your debt. Read The Ascent's full review for free and apply in just 2 minutes.
We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.
The Ascent is a Motley Fool service that rates and reviews essential products for your everyday money matters.
Copyright © 2018 - 2021 The Ascent. All rights reserved.