The IRS recently announced that taxpayers can exclude up to $10,200 of their unemployment compensation they received in 2020. This means that $10,200 of your unemployment compensation received in 2020 is not subject to Federal Income Tax. This was a provision included in the recently passed American Rescue Plan Act of 2021.
Americans can expect to start seeing $600 in their bank accounts immediately as the federal government’s second round of stimulus payments are being sent out, the Treasury Department and the Internal Revenue Service said on Tuesday, December 29, 2020.
The direct deposits will continue into the first week of January, while paper checks will be mailed out beginning the second week of January.
The Covid-19 relief package provides individuals who meet income limits with $600; couples who meet income limits with $1,200; and eligible families with an additional $600 per child.
The $600 is half of what Americans received in the first round of stimulus payments Congress approved back in March. It took two weeks after that first Covid-19 relief bill was passed for the IRS to start sending out the money — but some eligible recipients still have not received it, months later.
An individual’s most recent tax returns determines their eligibility for the stimulus payment. The prior and current Stimulus payments are not subject to Federal or State Income Tax.
Most Social Security retirement and disability beneficiaries, railroad retirees and those receiving veterans’ benefits do not need take any action to receive a payment. Earlier this year, the IRS worked directly with the relevant federal agencies to obtain the information needed to send out the new payments the same way benefits for this group are normally paid. For eligible people in this group who didn’t receive a payment for any reason, they can file a 2020 tax return.
Anyone who made $75,000 or less as an individual or $150,000 as a couple would receive the full amount. This is based on your 2019 Adjusted Gross Income.
The prior and current Stimulus Payments being sent out are advances on a 2020 refundable tax credit, which will be based on 2020 income tax return filed. Therefore, if you made $75,000 or less during 2020, you would receive the first and second stimulus payment as a refundable tax credit, even though you made more than $75,000 in 2019. The credit will reduce one’s tax bill and if it exceeds what someone owes, it will increase their tax refund. This will all be handled on your 2020 income tax return.