The Senate version of the $1.9 trillion Covid relief bill includes a tax break on unemployment benefits wherein the first $10,200 unemployment compensation a person receives in jobless benefits are not subject to federal income tax. The provision exempts the first $10,200 in benefits received last year from federal income taxes for households that earned less than $150,000.
One of the biggest issues with this is for the more than 45 million people who have already filed their taxes for 2020. That means millions of people may have to amend their returns to take advantage of the change. Additionally, the IRS will need to reprogram its computers to incorporate the new tax break. Both situations will further stress a tax agency that is already struggling to keep up during the pandemic according to the Wall Street Journal. Many tax professionals are asking for the IRS to extend the filing date. No decision has been reached on extending the filing deadline. IRS has mentioned that they would have to stop receiving tax returns for a few days in order to get the changes made in their program.
Form 1099G for Unemployment Compensation – Information and Resources
The California Employment Development Department (EDD) recently released new information and resources to help individuals who received a Form 1099G for unemployment compensation, as these payments must be reported on the individual’s state and federal tax returns. Note: Unemployment Insurance benefits are not taxable for California’s State Income Tax.
