IRS provides two, new COVID relief-related updates
IMPORTANT IRS COVID RELIEF UPDATES!
In recent weeks, the IRS has provided two important COVID relief-related updates that taxpayers should be aware of:
1) THE FIRST $10,200 OF UNEMPLOYMENT IS TAX FREE:
The new COVID relief law makes the first $10,200 of unemployment compensation received in 2020 tax free. The IRS has provided instructions for taxpayers and tax preparers on how to claim the new exclusion, and tax preparers should know how to do this: https://www.irs.gov/forms-pubs/new-exclusion-of-up-to-10200-of-unemployment-compensation
If you already filed a 2020 return reporting your unemployment compensation, do not file an amended return. The IRS is trying to automatically refund taxpayers any money they may be owed. Stay tuned for more information.
2) YOU CAN KEEP MISSED STIMULUS PAYMENTS EVEN IF YOU OWE PAST IRS DEBT:
The IRS recently announced they will not offset any missed 2020 stimulus payments for past IRS debt. If you did not get either or both of the first and second round IRS economic impact payments ($1,200 per adult and $500 per child in round 1; $600 per person in round 2), you should claim these payments as Recovery Rebate Credits on your 2020 return.
Though the rest of your refund could still be applied to past IRS debt, and though your Recovery Rebate Credit will still be applied to your 2020 tax liability, the IRS made clear they will not take taxpayers' Recovery Rebate Credits to apply them to past IRS debt. The Recovery Rebate Credit would be yours to keep. If you owe other governmental debt, the recovery rebate credit may still be taken to pay down that debt. To see if you owe other debt for which your refund could be taken, call the Treasury Offset Program at 800-304-3107.