The latest economic stimulus package aimed at helping American workers struggling during the COVID-19 pandemic extends federal unemployment checks this year and waives up to more than $1,000 in taxes on jobless assistance you may have received in 2020.
The tax break amendment comes in response to a wave of protests from workers who are just discovering they owe the IRS 10% of what they collected in unemployment assistance last year. While many workers were given the option to have the 10% tax deducted from their weekly unemployment checks, some were not. Regardless of who was or was not notified, experts have argued that the tax undermines the purpose of the emergency financial assistance.
“Partial tax forgiveness will ensure that millions of Americans don’t have to mail their relief checks back to the IRS, and can instead put food on the table, refill prescriptions and pay the rent,” Elizabeth Pancotti, a policy director at Employ America and co-author of a February research paper on tax forgiveness for The Century Foundation, told CNBC.
For the coming year (through Sept. 6), Congress also extended Federal Pandemic Unemployment Compensation (FPUC), which consists of $300 per week over and above whatever eligible workers receive in state unemployment benefits. When the first pandemic-related economic stimulus package passed in late March 2020, the FPUC benefit was $600 per week. In a subsequent relief bill, it dropped to $400 in weekly supplemental unemployment aid.
Workers who received those unemployment benefits last year are eligible for up to $1,020 in tax breaks on that income.
While the stimulus bill has not yet reached President Joe Biden’s desk, it is not expected to undergo substantial changes from its current form. After the president has signed the bill, as CNBC notes, the IRS, US Treasury Department and others will still need to implement the new rules and issue guidance on them.
Here’s the takeaway: If you received unemployment assistance in 2020, you are best advised to wait until the latest stimulus package becomes law before filing your taxes. Those who have already filed their 2020 tax returns and paid the 10% tax will need to send in an amended return. But they should also wait to do that until the bill becomes law.
Click here for further information on Washington state resources for workers affected by coronavirus.
Emery Reddy helps workers. Call us if you have an L&I, workers’ comp, injury, or other employment law claim. You won’t get better advice.