There is some good news for the millions of people who had to file for and receive unemployment income benefits last year because of the pandemic. In March of this year, the American Rescue Plan Act of 2021 became law. This bill included some tax benefits for people who received unemployment income during 2020.
Many people were unsure what tax bills they would have once they prepared their 2020 income taxes because instead of just their regular income, they had unemployment income to contend with on their taxes. The unknown of that was scary for many who held onto any extra money they had in fear that they would owe the IRS. Luckily, the American Rescue Act of 2021 was passed, which included an exemption for a set amount of unemployment income.
In this article, we will discuss what tax benefits the American Rescue Act of 2021 provides to people who received unemployment compensation in 2020. If after reading this article you have questions about your own situation, contact an experienced Sarasota IRS Attorney.
The Law Office of Mary E. King, P.L. can make sure that your tax planning and other issues are resolved efficiently and at the lowest cost to you. Please fill out our online contact form, or call us at 941-906-7585 today.
1. What is the Unemployment Compensation Tax Exemption?
If you received unemployment compensation benefits in 2020, you won’t be required to pay taxes on the first $10, 200 of benefits. This exemption applies to people who have a modified adjusted gross income of $150,000 or less.
This tax waiver in the most recent stimulus package will help a lot of people still struggling due to job loss during the pandemic.
Remember, you will still have to claim the income on your tax return when you prepare it, but there is a worksheet and a specific place and way to report the excluded income. The IRS did not make it easy for people to understand or figure it out, so contact a Sarasota IRS Attorney with questions on the specifics of the exemption.
2. What If I already Filed My Tax Return?
If you filed your tax return before this new stimulus package became law, which was officially enacted on March 11, 2021, you do not need to file an amended return. After the stimulus package passed, the IRS enacted procedures to account for all the people who had already filed tax returns and are eligible for this exemption. The IRS applies the unemployment compensation exemption to your filed tax return and figures the amount of taxes you will owe based on this new benefit. They will send a refund to you if you paid too much in taxes after this exemption is applied.
However, be aware that the IRS will keep any money you owe them for other outstanding taxes before they return any refund to you. So, if this change in the law means you would now receive a refund but owe the IRS back taxes for other years, they will apply the overpayment to back taxes owed instead of sending a refund to you. If you are unsure how this impacts you and any taxes you owe, call a Sarasota IRS Attorney.
3. What if I Haven’t Filed My Tax Return Yet?
If you are taking advantage of the extended tax deadline of May 17th, then you are required to figure the exemption when you prepare your tax return. The IRS has a worksheet to use titled “Unemployment Compensation Exclusion Worksheet” which is supposed to assist you with determining the specific places to account for your unemployment compensation income that includes and then also that doesn’t include the $10,200 exemption. This of course only applies if you have a modified adjusted gross income of less than $150,000.
A Sarasota IRS Attorney Can Assist You in Determining Your Tax Liability.
Consider reaching out to the Law Offices of Mary E. King for help. Tax matters can be complicated, and thus, it is always helpful to have someone in your corner who understands the tax law and deals with the IRS on a regular basis. Indeed, beyond just the tax laws, there could be other issues with which a seasoned tax attorney can help.
So, when it comes to dealing with tax questions, tax relief, and tax litigation, you need to talk to a tax lawyer in Sarasota who can help. Mary E. King has spent her career concentrating in tax law and can help you in Florida and elsewhere. Attorney King has a wealth of information about what types of options would make the most sense for you or your business.
That helps explain why she’s received an A+ rating from the Florida Better Business Bureau. If you have a tax-related issue – no matter how small or how large – setting up an initial consultation with Mary E. King, tax lawyer of Florida, is the first step you should take towards relief.
The Law Office of Mary King P.L. offers complete IRS problem-solving services including all areas from tax debt settlement to planning the most efficient tax strategy for individuals and businesses. Call us today to schedule an initial consultation. With years of experience as Sarasota IRS Attorneys for many clients, Attorney Mary E. King can make sure that your tax issues are resolved in your favor. Fill out our online contact form, or call us at 941-906-7585. Remember, at the Law Office of Mary E. King, we are focused on solving your tax issues for good.
The information in this blog post is provided for informational purposes only and is not intended to be legal advice. You should not make a decision whether or not to contact an attorney based upon the information in this blog post. No attorney-client relationship is formed nor should any such relationship be implied. If you require legal advice, please consult with an attorney licensed to practice in your jurisdiction.