Included in the American Rescue Plan is a waiver for unemployment benefits for certain taxpayers. If you received unemployment benefits in 2020 and have already filed, your tax return may now need to be amended. The good news, your overall tax liability will be reduced because of this change and you will be receiving a refund. The bad news, we are in a holding pattern until the IRS and our software update the code and the forms. Therefore, we are not able to complete amended returns at this time. The fact that the tax law was changed a month after the IRS started accepting taxes promises to further complicate an already challenging filing season.
To date, the IRS has issued the following guidance:
“The IRS is reviewing implementation plans for the newly enacted American Rescue Plan Act of 2021. Additional information about a new round of Economic Impact Payments, the expanded Child Tax Credit, including advance payments of the Child Tax Credit, and other tax provisions will be made available as soon as possible on IRS.gov. The IRS strongly urges taxpayers to not file amended returns related to the new legislative provisions or take other unnecessary steps at this time.
The IRS will provide taxpayers with additional guidance on those provisions that could affect their 2020 tax return, including the retroactive provision that makes the first $10,200 of 2020 unemployment benefits nontaxable. For those who haven't filed yet, the IRS will provide a worksheet for paper filers and work with the software industry to update current tax software so that taxpayers can determine how to report their unemployment income on their 2020 tax return. For those who received unemployment benefits last year and have already filed their 2020 tax return, the IRS emphasizes they should not file an amended return at this time, until the IRS issues additional guidance.”
As of today, we are waiting for additional guidance on how to handle these “already filed” returns.
We will keep you informed of any additional changes and will complete your return as soon as our software updates & the IRS issues guidance.