TAX PROVISIONS IN THE AMERICAN RESCUE PLAN
July 6, 2021 - Douglas Myser
Tax provisions in the american rescue plan. Retroactive tax benefits help many people now preparing 2020 tax returns. The Internal Revenue Service stated that an overview of some of the key provisions in the American Rescue Plan included advanced payments of the Child Tax Credit for eligible couples or families. Several provisions affect the 2020 tax return people are filing out this filing season, including one exempting up to $10,200 in unemployment compensation from tax and another benefitting many people who purchased subsidized health care coverage through either federal or state Health Insurance Marketplaces. In addition, the law also includes a third round of Economic Impact Payments, now going out to eligible Americans, that are generally equal to $1400 per person for most people, as well as several other key changes for tax year 2021. Tax provisions in the american rescue plan.
The Internal Revenue Service is asking taxpayers who have already filed the 2020 tax return to avoid filing amended returns, refund claims or contacting the IRS about obtaining newly enacted tax benefits. Taking any of these actions now will not speed up a future refund and may even slow down an existing refund claim. Instead, as noted, the IRS will automatically provide these benefits to eligible filers. For tax year 2020 only, the first $10,200 of unemployment compensation is not taxable for most households. This tax benefit is only available to those whose modified adjusted gross income is below $150,000 during 2020. The same income cap applies to all filing statuses. This means that those eligible who haven't filed a 2020 return yet can subtract the first $10,200 from the total compensation received and only include the difference in their taxable income. For couples where both spouses received. Unemployment compensation, each spouse can subtract $10,200. For any eligible taxpayer who has already filed and reported their compensation as fully taxable, the IRS is automatically adjusting their return and providing them with this tax benefit. They will not have to do anything at all.
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