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- The American Rescue Plan provides extended unemployment benefits, including a $300 boost per week, through Sept. 6, 2021
- $1,400 stimulus payments for those making up to $75,000 could be received within the next two weeks
- The plan offers a tax break for the first $10,200 in unemployment benefits received in 2020
The first major pandemic relief bill of 2021 extends unemployment benefits for millions of Americans who have lost their jobs to the pandemic recession over the past year.
The $1.9 trillion American Rescue Plan — which was signed into law by President Biden Thursday, continues key federal unemployment programs initially passed as part of the CARES Act last March. It also includes new $1,400 stimulus payments and tax breaks to keep more money in Americans’ hands.
The bill also comes in the middle of an already-complex 2020 tax season. Here’s what you need to know about the American Rescue Plan and what it could mean for your 2020 taxes:
What Are The Extended Unemployment Benefits?
The bill extends federal unemployment insurance programs and an additional $300 boost per week until Sept. 6, 2021. This adds 25 more weeks to two federal unemployment programs: the Pandemic Emergency Unemployment Compensation (PEUC) and the Pandemic Unemployment Assistance program (PUA).
The PEUC allows states to provide extra weeks of benefits to those who have already used up their maximum available state benefits. The PUA program extends unemployment benefits to self-employed workers, freelancers, or gig workers who normally would not qualify.
You can now receive up to a maximum of 49 weeks of PEUC, and up to 75 weeks of PUA.
Will There Be a Lapse In My Benefits?
Any delays will be “less severe than the December lapse,” says Elizabeth Pancotti, a policy director at Employ America, labor policy think tank. This is mainly because there won’t be a legal lapse in benefits, since the American Rescue Plan was passed before the previous measures are set to expire on March 14.
“There could be a delay of maybe two weeks, but I wouldn’t call it a lapse,” says Andrew Stettner, an unemployment researcher with The Century Foundation, a progressive labor and employment think tank.
Stettner also says it’s less likely that people will be immediately cut off from receiving unemployment benefits on March 14, as the previous law enabled many individuals to receive unemployment benefits through April 10 depending on when they filed the claim.
“I do believe that the vast majority of states will be able to get [the new] benefits up and running by April 10,” Stettner says.
Make sure you continue to file weekly and stay connected with your local unemployment office to ensure you continue to receive benefits.
“We really think most people will get continuous benefits this time,” Stettner said.
What Does the New Unemployment Bill and Stimulus Mean for 2020 Tax Returns?
$10,200 Unemployment Tax Break
Normally, you would have to pay regular taxes on any unemployment benefits you’ve received, but the new bill gives a tax exemption to the first $10,200 of unemployment insurance received in 2020.
Details on how exactly to claim the exemption will become more clear after the IRS issues guidance to taxpayers.
If you filed jointly, and both spouses received unemployment benefits, the text of the law implies both spouses should each be able to claim the exemption.
If you already filed your tax return for 2020 and paid taxes on any unemployment benefits received, you can submit an amendment to get that money back. If you haven’t filed yet, you’ll be able to reduce your unemployment income by $10,200.
If you filed online, you should use the same software to file your amendment — known as Form 1040-X. If you worked with a professional, follow up with them to make sure the form is submitted accurately and on time.
This latest round of stimulus payments will be based on your earnings from your most recent tax return the IRS has on file. That means for some who have already filed 2020 taxes, the stimulus will be based on last year’s earnings, while others will be paid based on 2019 income.
If you work with a tax pro, ask them about how the new stimulus payment factors into your 2020 taxes, and whether it might make sense to hold off filing if you haven’t yet. If you do your own taxes, make sure you fill out all your information carefully and accurately to make sure you receive any stimulus payment — or credit — you are entitled to.
And you could see the money from your payment sooner than you think, with payments being made to bank accounts the IRS has on file from your most recent tax return. If you’ve yet to file your 2020 taxes, then the IRS will use whatever bank account is attached to your 2019 return. If your return for 2020 has already been processed, then that account will receive the payment.
“I anticipate it being very quick,” says Stettner. “Some people will get it within two weeks.”
How Is the New Stimulus Payment Determined?
The package includes a new round of $1,400 payments for individuals with an adjusted gross income of up to $75,000, heads of household with income up to $112,500, and $150,000 for joint filers.
After that threshold, the payment amounts will be reduced until a ceiling is reached: $80,000 for single filers, $120,000 for heads of household, and $160,000 for married couples. No one with income above those ceilings will receive money in this round of stimulus payments.
|Single||Head of Household||Married|
|To receive full stimulus amount, you must make less than||$75,000||$112,500||$150,000|
|To receive any stimulus amount, you must not make more than||$80,000||$120,000||$160,000|
As with previous stimulus payments, you will not owe any taxes on the payments. That’s because stimulus payments are technically tax credits paid out in advance, and why those who for some reason did not receive payments they were owed in 2020 can claim them on their tax returns.
What Are the Changes to the Child Tax Credit?
This package also includes changes to the Child Tax Credit. The update provides families with children younger than 6 up to $3,600 annually, and up to $3,000 annually for children aged 6 to 17. The credit is applied per child.
The credit begins to phase out for individual filers making more than $75,000 per year, or $150,000 for joint filers. The new credit applies to your 2021 return (which you’ll file early next year), but the bill calls for advance credits to be paid “periodically” throughout this year. While details still need to be worked out, payments could begin as early as July, according to the bill.
One of the biggest changes to this credit, which has existed previously, is the stipulation that you can still receive it even if you didn’t work in the last year. Previously, taxpayers who claimed at least one child as their dependent could claim up to $2,000, but there were a lot more stipulations and qualifications.
“This increase in the child credit has got to really help out families right now,” Stettner says. “Obviously a lot of people are raising kids and can’t work because of the coronavirus, so to be able to claim this credit is huge.”
What Other Help Is Available?
Outside this latest relief bill, Americans can also get help in the form of student loan relief, eviction and foreclosure moratoriums, and other programs already available:
- Federal student loan relief: President Biden in January suspended federal student loan payments through Oct. 1. Part of the American Rescue Plan is a provision that makes forgiven student debt tax-free.
- Eviction and foreclosure moratoriums: Extended through March 2021
- Food support: Previous relief legislation allocated an additional $13 million to the supplemental nutrition assistance program (otherwise known as food stamps), increasing maximum benefits available through June 30.
- Utility moratoriums: Your state may have a utility bill moratorium in place to allow your home to keep heat through the winter months, even if you can’t pay.