If you received unemployment benefits in 2020 but you still earned too much to receive the full $1,400 stimulus check, a provision in the $1.9 trillion coronavirus relief bill could change that for you.
One of the bill’s provisions makes unemployment benefits free of federal tax, retroactive for 2020 benefits.
The IRS clarified on Tuesday that the unemployment benefits will not count toward adjusted gross income, the figure used to determine whether people are eligible for the $1,400 stimulus payment. That means more people will be eligible for the stimulus checks.
Here’s how it works.
Federal taxes will be waived on the first $10,200 in unemployment benefits for single people, or $20,400 for married couples who both collected unemployment and file joint tax returns.
To be eligible for the tax break, households, whether single or married, must not have adjusted gross income exceeding $150,000, said Neil Becourtney, a certified public accountant with CohnReznick in Holmdel.
New Jersey does not tax unemployment benefits.
Becourtney offered this example. Say a married couple had wages of $148,000 in 2020 and unemployment compensation of $12,000. Before the stimulus bill, that would have put their adjusted gross income at $160,000 and they would not have been eligible for a stimulus payment, which has a cutoff of $150,000 for the full benefit. But by making the unemployment benefits exempt from federal tax and not part of adjusted gross income, the couple’s $148,000 adjusted gross income would make them eligible for two $1,400 payments.
“If the unemployment compensation would have pushed the taxpayer to a point of being ineligible for a $1,400 stimulus rebate, this provision may therefore provide a double benefit,” he said.
Becourtney also offered this example. Take a single person who earned $73,000 of wages and had $9,000 of unemployment compensation in 2020. Without the nontaxable provision, adjusted gross income would be $82,000. The taxpayer would have been ineligible for the $1,400 stimulus, which has a cutoff of $75,000 for a full benefit and $80,000 for a partial benefit for single people. But because the unemployment compensation is not taxable, adjusted gross income is only $73,000 and the person would be eligible for the full $1,400 payment.
The IRS said Tuesday that people who already filed their tax returns don’t have to file an amended return to get the tax-free unemployment benefits. Instead, the agency will automatically recalculate taxes owed and send a refund to eligible people.
Use our stimulus calculator to see how much you may receive.
Please subscribe now and support the local journalism YOU rely on and trust.
NJ Advance Media Staff Writer Jonathan D. Salant contributed to this report.
Karin Price Mueller may be reached at KPriceMueller@NJAdvanceMedia.com.
"payment" - Google News
March 25, 2021 at 02:51AM
https://ift.tt/2Pnv8Ns
Stimulus check update: More people will be eligible for $1,400 payment due to unemployment tax change - NJ.com
"payment" - Google News
https://ift.tt/3bV4HFe
https://ift.tt/2VYfp89
Bagikan Berita Ini
0 Response to "Stimulus check update: More people will be eligible for $1,400 payment due to unemployment tax change - NJ.com"
Post a Comment