TurboTax unemployment exemption: Tax companies still working changes

Stimulus

FOSTER CITY, CA – JANUARY 28: TurboTax products sit on display at Costco on January 28, 2016 in Foster City, California. (Photo by Kimberly White/Getty Images for TurboTax)

WASHINGTON (NEXSTAR) — The American Rescue Plan Act of 2021 includes new guidance that allows people to waive tax liability on up to $10,200 of unemployment compensation in 2020. According to CNBC, both TurboTax and H&R Block are still working to update their tax software to include the new exemption.

Here is the provision as described by the IRS:

“If your modified adjusted gross income (AGI) is less than $150,000, the American Rescue Plan enacted on March 11, 2021, excludes from income up to $10,200 of unemployment compensation paid in 2020, which means you don’t have to pay tax on unemployment compensation of up to $10,200. If you are married, each spouse receiving unemployment compensation doesn’t have to pay tax on unemployment compensation of up to $10,200. Amounts over $10,200 for each individual are still taxable. If your modified AGI is $150,000 or more, you can’t exclude any unemployment compensation.”

A TurboTax spokeswoman told CNBC they expect to have their software updated by Thursday evening. H&R Block is reportedly awaiting further guidance from the IRS and did not provide a timeline.

The Treasury Department says it has sent out 90 million economic impact payments totaling $242 billion since President Joe Biden signed a $1.9 trillion pandemic relief plan last week.

The bulk of those payments were made by the IRS as direct deposits, which recipients starting seeing in their bank accounts last weekend, officials said Wednesday.

In addition, Treasury has mailed out roughly 150,000 checks worth about $442 million.

Processing of the payments began last Friday, the day after Biden signed the American Rescue Plan, which authorized direct payments of up to $1,400 to qualifying individuals.

Treasury said the first batch of payments went to eligible taxpayers who provided direct-deposit information on their 2019 or 2020 tax returns. Included were people who don’t typically file a return but who used a non-filers tool at IRS.gov last year to be included in two earlier rounds of COVID-19 relief payments.

Officials said additional batches of payments will be sent in coming weeks by direct deposit and through the mail as a check or debit card.

No action is needed by most taxpayers to receive the payments, which will be automatic and similar to how people received their first and second round of economic impact payments in 2020.

The payments, which are being made to cushion the blow from the coronvirus pandemic, started with $1,200 payments in the first round last spring and $600 payments in a second round of payments approved by Congress in December.

TurboTax and H&R Block have confirmed the IRS has correct bank account information for all of its customers and no issues are expected to impact the third stimulus check direct deposits.

Earlier this year, a glitch impacted TurboTax customers that delayed stimulus check direct deposits. In a statement, the company said the IRS has accurate bank account information for all its customers.

“We are working closely with the IRS, and we’ve confirmed that the IRS has accurate bank account information for all TurboTax customers,” the company said in a statement.

H&R Block was also impacted by the glitch earlier this year. In a statement, they indicated they do not anticipate any issues that would impact their customers.

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