You could get a surprise check if you are a recipient of unemployment benefits and pay taxes on them. And you will get the check as early as May 2021.
This benefit, part of the American Rescue Plan Act 2021, gives you $10,200 if you file taxes on your unemployment benefits.
The IRS will automatically send the money if you have filed your tax returns before the changes to the unemployment law were effective.
23 million people filed for unemployment benefits in 2020. They include self-employed and contractual workers.
Things You Should Know About Unemployment Benefits
As per the American Rescue Plan, you are excluded from income up to $10,200 of the total unemployment compensation paid in 2020. So you don’t have to pay tax on that amount. For married couples, each spouse is exempted from paying income tax of up to $10,200 on unemployment compensation.
This is applicable if your modified gross income is below $150,000. If your income is $150,000 or more, you don’t get this benefit.
The IRS will automatically send the refund once it determines that you are entitled to it. The refunds will start in May. You will not have to file an amended return for the exemption.
There are gray areas of information that could do with some clarification. We are still not sure of the date of the payment. Another issue is the mode of payment and which tracker or tool will help us to track it. We still do not know if the payment will be accompanied by a letter detailing the payment as in the case of the stimulus check.
Only 2020 unemployment benefits are exempted from taxes. Around 40 million people received the benefits in 2020. Once the IRS starts issuing the payments, it would be advisable to seek professional advice to be sure that you have received the right amount.