With tax season coming in, Americans have three recurring problems in mind: unemployment, taxes, and stimulus checks. The Biden Administration promises financial support alongside the IRS, which oversees the delivery of these stimulus payments. However, to ensure that eligible individuals can receive their monetary benefits, a tax exemption has been implemented.
The Biden Administration's $1.9 trillion COVID-19 relief package program continues, and there are rumors of a fourth wave of stimulus checks coming in. However, before that happens, Americans need to complete their transactions from the first, second, and third waves.
It could get confusing with the new policies, eligibilities, phase-out, and payment credit that comes out during each wave. Try reading through these articles to get your payments sorted out
- Tax Refund 2021 Tracker
- $3600 Child Tax Credit Tracker
- Stimulus Check Tracker for Missing 1st and 2nd Payments
- Stimulus Check Plus-Up Payment Calculator
$10,200 Tax Exemption Status
With the pandemic ongoing, people can be subjected to unfortunate circumstances such as debts and unemployment. Fortunately, IRS reported that The American Rescue Plan enacted on March 11 will exclude $10,200 as unemployment compensation paid in 2020.
This benefit is open to individuals who have a modified adjusted gross income (AGI) less than $150,000. For married couples, each spouse will be receiving the unemployment compensation of $10200 per individual. However, if the AGI is exactly $150000 or more, they are exempted from receiving the Tax Exemption.
The Tax Exemption works by ensuring the $10,200 unemployment insurance will not be taxable. For example, you are entitled to receive $20,000 worth of benefits. Assuming you have exactly $20,000 tax payment dues, only $9800 will be taxed. A total of $10200 in its entirety must be delivered to your account, as the financial support provided by the government.
Unfortunately, not all states will be implementing this tax exemption. Cnet reported 13 States who do not provide the tax break:
- Colorado
- Georgia
- Hawaii
- Idaho
- Kentucky
- Massachusetts
- Minnesota
- Mississippi
- New York
- North Carolina
- Rhode Island
- South Carolina
- West Virginia
How to File for Unemployment Compensation
If you are eligible for the benefit, you should immediately apply for the benefit! IRS has some instructions available online through their website.
You would need to file Form 1040, 1040-SR, 1040-NR. The website has these forms available and ready for download. It is recommended you should print and complete them before visiting the IRS office to save yourself time. After completing them, you might have to submit these forms yourself through the IRS counter.
The $10,200 Tax Exemption should be a big help to the eligible families who desperately need financial aid in these difficult times. For people who have already filed their taxes before this announcement, IRS would determine if the taxpayer is owed a refund. You might still be required to fill the forms provided above. Refunds will start rolling out sometime this May.
Related Article: Fourth Stimulus Check Tracker: Updates on New Payment, Tools, Calculators for Proposed $2000 Relief
