WASHINGTON (NEXSTAR) — The American Rescue Plan Act of 2021 includes guidance on how tax filers can waive federal tax liability on up to $10,200 of unemployment compensation in 2020.
As of Friday, H&R Block Online has updated its online filing system to include this federal tax waiver. TurboTax told CNBC earlier this week they expected to have the software updated by Thursday. As of 12 p.m. ET on Friday, the online tax software was not showing the tax exemption.
If you are filing with H&R Block, here is how to make sure your unemployment tax waiver is correctly applied to your filing: After adding your 1099-G form, make sure your refund/total due amount does not change (if less than $10,200).
To confirm, you can open your tax return PDF under “overview” titled “My 2020 Return” and scroll until you find a Schedule 1 document with the amount in parenthesis.
According to TurboTax, the company is still awaiting “additional guidance” from the IRS before it implements the new tax laws related to unemployment.
If you already filed your 2020 taxes and paid federal income tax on unemployment, you are eligible to file an amended return. However, according to H&R Block, the IRS “strongly urges taxpayers to not file amended returns related to the new legislative provisions or take other unnecessary steps at this time.”
Here is the provision as described by the IRS:
“If your modified adjusted gross income (AGI) is less than $150,000, the American Rescue Plan enacted on March 11, 2021, excludes from income up to $10,200 of unemployment compensation paid in 2020, which means you don’t have to pay tax on unemployment compensation of up to $10,200. If you are married, each spouse receiving unemployment compensation doesn’t have to pay tax on unemployment compensation of up to $10,200. Amounts over $10,200 for each individual are still taxable. If your modified AGI is $150,000 or more, you can’t exclude any unemployment compensation.”
The Treasury Department said it has sent out 90 million economic impact payments totaling $242 billion since President Joe Biden signed a $1.9 trillion pandemic relief plan last week.
The bulk of those payments were made by the IRS as direct deposits, which recipients started seeing in their bank accounts last weekend, officials said Wednesday.
In addition, the Treasury has mailed out roughly 150,000 checks worth about $442 million.
Processing of the payments began last Friday, the day after Biden signed the American Rescue Plan, which authorized direct payments of up to $1,400 to qualifying individuals.
The Treasury said the first batch of payments went to eligible taxpayers who provided direct-deposit information on their 2019 or 2020 tax returns. Included were people who don’t typically file a return but who used a non-filers tool at IRS.gov last year to be included in two earlier rounds of COVID-19 relief payments.
Officials said additional batches of payments will be sent in coming weeks by direct deposit and through the mail as a check or debit card.