Recipients of the federal unemployment benefits might be able to receive a tax refund from the Internal Revenue Service, even if they filed taxes before President Joe Biden implemented the $10,200 tax break as part of the American Rescue Plan.
The new rules indicate that the unemployment insurance doesn’t classify as earned income during the pandemic, meaning that they can’t get taxed on the money from 2020.
The IRS reported last week that it will continue processing tax returns and examining taxes paid on the unemployment bonuses, as all refunds will vary depending on the taxpayer, with some not qualifying for any refund.
Nearly 23 million Americans filed for unemployment during 2020, according to the Bureau of Labor Statistics.
If taxpayers are expecting an unemployment tax refund it’s important to keep in mind that the tax relief is only for Americans who made less than $150,000 in adjusted gross income; the IRS began sending out refunds this month; recipients will automatically send a check if the taxpayer qualifies for a refund; and the agency will send a notice explaining any corrections within 30 days of when a correction is made.
Taxpayers expecting a refund will also not be able to track the status of the return through any IRS portal, such as the Get My Payment tracker tool, the Where’s My Refund tool or the Amended Return Status tool.
Biden’s $1.9 coronavirus rescue package sent unemployed Americans $300 weekly unemployment benefits that last through September, a measure that was extended after the previous administration passed the Cares Act last year, which pumped $600 weekly jobless bonuses into the pockets of unemployed people.
Republicans have recently surfaced arguments over the jobless aid, contending that it is a key contributor to the labor shortages across the country and a factor that is slowing down America’s economic recovery. GOP lawmakers say that the expanded benefits have prevented people from going back to work.
“We have flooded the zone with checks that I’m sure everybody loves to get, and also enhanced unemployment,” Senate Minority Leader Mitch McConnell (R-Ky.) said earlier this month from Kentucky. “And what I hear from businesspeople, hospitals, educators, everybody across the state all week is, regretfully, it’s actually more lucrative for many Kentuckians and Americans to not work than work.”
He added, “So we have a workforce shortage and we have raising inflation, both directly related to this recent bill that just passed.”
More than a dozen GOP-led states cut off some form of the $300 weekly unemployment bonuses, including the benefits set aside for the gig economy and self-employed workers.
Rachel Bucchino is a reporter at the National Interest. Her work has appeared in The Washington Post, U.S. News & World Report and The Hill.
You Might Soon Get a Bonus ‘Stimulus Check’ From the IRS Soon is written by Rachel Bucchino for nationalinterest.org