By now, if you are eligible, you have likely received your $1,400 stimulus check as promised under the $1.9 trillion America Rescue Plan (ARP). For additional information on the ARP, review last week’s article CLICK HERE. If you have not received your check, visit www.IRS.gov, or follow the direct link to GetMyPayment.
With the ARP, there are two surprises:
- 2020 unemployment income may be tax-free. The ARP provides that the first $10,200 of 2020 unemployment benefits ($20,400 if your spouse also received $10,200 or more of unemployment benefits) are tax-free. Households with adjusted gross income exceeding $150,000 do not qualify.
- Income tax filing deadline delayed until May 17, 2021. Typically, you must file your 2020 income tax return by April 15, 2021. Because ARP did not announce that 2020 unemployment benefits would be tax-free until March of 2021, millions of people had already filed their returns, and millions more will do so over the next month. Unfortunately, tax filing forms and tax software are not available to handle this tax law change, so the IRS postponed the due date.
What you need to know
- If you received unemployment income in 2020 and already filed your return, do not file an amended return. The government is trying to determine if the IRS can ‘automatically’ adjust your return and issue a refund. Wait for their instructions.
- If you received unemployment income in 2020 and have not filed your return, you should wait for guidance from the IRS. They are working on updating forms and related software, including providing updates to third-party software companies such as Turbo Tax.
- While you have until May 17, 2021, to file your 2020 income tax return, you must still make timely first quarter 2021 tax estimates. This delay does not affect the extended filing due dates of September and October of 2021.
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Stewart H. Welch, III, CFP®, AEP, is the founder of THE WELCH GROUP, LLC, which specializes in providing fee-only investment management and financial advice to families throughout the United States. He is the author or co-author of six books, including 50 Rules of Success; J.K. Lasser’s New Rules for Estate, Retirement and Tax Planning- 6th Edition (John Wiley & Sons, Inc.); THINK Like a Self-Made Millionaire; and 100 Tips for Creating a Champagne Retirement on a Shoestring Budget. For more information, visit The Welch Group. Consult your financial advisor before acting on comments in this article.
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