A change in the way taxes are collected on unemployment benefits may mean that some who thought they made too much money to get the $1,400 stimulus payment may be in for a pleasant surprise.
A provision in the American Rescue Act made the first $10,200 of unemployment benefits tax-free, meaning you do not have to include that income as part of your adjusted gross income – or the amount you pay taxes on once all your deductions have been taken.
For some, the subtraction of $10,200 of income puts their AGI below $75,000, which as an individual filer will make them eligible for a direct payment of $1,400.
Couples filing jointly will get $20,400 off their tax bill.
The third COVID-19 relief payment, which is included in a bill that President Joe Biden signed into law on March 11, is meant to send $1,400 to adults earning less than $75,000 and $2,800 to couples earning less than $150,000 AGI. In addition, $1,400 will also be sent for each dependent in the household.
The IRS said this week that those who have already filed their 2020 tax returns will not have to file an amended return to get the $1,400 payment. Instead, the IRS will automatically recalculate their taxes and send a refund if they are eligible.
The IRS information on unemployment benefits comes as millions of Social Security and Veterans Administration recipients are looking for their $1,400 payments.
A Social Security spokesperson told the Huffington Post in an email Wednesday that the agency intended to send the payment file to the IRS on Thursday. The spokesman said the agency was not allowed to work on the payment information earlier because it did not receive the same kind of appropriation it did for the first round of payments last year.
“Social Security staff is working day and night with Treasury and IRS representatives to ensure that the electronic file of Social Security and SSI recipients is complete, accurate, and ready to be used to issue payments,” the spokesperson said.
The IRS said in a news release that it would provide more information about payments to people on Social Security “as soon as it becomes available.”
Cox Media Group