The IRS sent out an important update on Wednesday that provides some clarity for people receiving some of the benefits associated with the $1.9 trillion stimulus legislation that President Biden signed into law several weeks ago.
Basically, for people who’ve already filed their taxes, the tax agency is going to automatically refund any necessary money this spring and summer for people who reported receiving unemployment compensation before the changes made by the stimulus law. That law, which Biden signed on March 11, lets taxpayers who earned up to $150,000 in modified adjusted gross income exclude any unemployment compensation they received, up to $20,400 if married filing jointly (and $10,200 for all other eligible taxpayers). Before this, especially if someone had become jobless for the first time, they might not have immediately realized that jobless benefits are taxable income, something that the stimulus law changes for 2020 unemployment benefits only. This means that, because some people might have gone ahead and reported the jobless aid income and paid taxes on it accordingly, they’ll be getting back a refund after the IRS recalculates their taxes — a refund that will sort of amount to a new stimulus check.
The news release from the IRS states that taxpayers don’t need to take any steps on their own for this recalculation to occur, and the first refunds are expected to come in May and then continue through the summer.
“For those taxpayers who already have filed and figured their tax based on the full amount of unemployment compensation, the IRS will determine the correct taxable amount of unemployment compensation and tax,” the IRS news release explains. “Any resulting overpayment of tax will be either refunded or applied to other outstanding taxes owed.
“For those who have already filed, the IRS will do these recalculations in two phases, starting with those taxpayers eligible for the up to $10,200 exclusion. The IRS will then adjust returns for those married filing jointly taxpayers who are eligible for the up to $20,400 exclusion and others with more complex returns.”
This is the thing about Biden’s stimulus law — the focus has always been on the stimulus checks, styled as such. Those $1,400 checks represent the third such direct payment to tens of millions of American taxpayers since the coronavirus pandemic began last year. But that legislation was also loaded up with other benefits that are paid out, too, in the form of what could technically be called a stimulus check — things like an increase in weekly federal unemployment benefits, as well as an expansion of the federal child tax credit.
The law also included the tax exemption, mentioned above, to offset unemployment income earned during 2020. For some context around how many Americans this benefit might affect, the Bureau of Labor Statistics says that more than 23 million US workers nationwide filed for unemployment in 2020.Today's Top Deal Unreal deal gets you Amazon’s hottest smart home gadget for $23 – plus a $40 credit! List Price:$29.98 Price:$22.99 You Save:$6.99 (23%) Available from Amazon, BGR may receive a commission Available from Amazon BGR may receive a commission