The new $1.9 trillion federal coronavirus relief package is aimed at getting money into the American people’s pockets, while also saving them money along the way too. The bill was officially passed by the House of Representatives on Wednesday, March 10 after months of back-and-forth. It has now been sent to President Joe Biden’s desk for him to officially sign.
Read on to learn what this bill means for Americans who received unemployment benefits in 2020:
Tax Waiver on First $10,200 of Unemployment Benefits
Though Senate Democrats agreed to lower unemployment aid from $400 a week to $300 a week, they did extend the payments through September 6. Likewise, they included a tax waiver on the first $10,200 in unemployment income for individuals who made less than $150,000 in 2020.
This will hopefully prevent individuals who have received unemployment in the last year from having to pay a high tax bill this April. In fact, more than 40 million Americans received unemployment in 2020 due to the pandemic.
“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, policy director at Employ America, told CNBC.
Keeping Money in People’s Pockets
Americans who needed unemployment income over the last year received $600 of Federal Pandemic Unemployment Compensation, as well as an extra $300 weekly through the Lost Wages Assistance program.
While individuals who receive unemployment can have 10% of their benefits withheld for tax purposes, less than 40% of people chose to do so last year.
Because of this, millions of Americans will have to pay taxes on the money they got from the government, which could seriously inflate their tax bill.
This new tax waiver will reduce up to $1,020 in tax liabilities, thus increasing people’s refunds or lowering the amount they owe.
So, for example, if an individual received $15,000 in unemployment from the government in 2020, they would not have to pay taxes on the first $10,200 but would have to pay taxes on the remaining $4,800.
What Should You Do If You’ve Received Unemployment?
President Joe Biden is expected to sign this new COVID stimulus bill on Friday, March 12, which means it will take some time for the IRS to implement these new rules.
If you haven’t filed your taxes yet and you received unemployment in 2020, it is probably a good idea to wait to file until the bill has been signed. However, if you’ve already filed, you will need to send in an amended return.