THE NEW COVID BILL MAY AFFECT YOUR 2020 RETURN
The new covid relief bill has one item that may affect your 2020 return and one that has a tax planning opportunity.
The bill includes $300 per week in unemployment benefits for 2021 up to 9/6/21
The bill also includes a provision to make up to $10,200 per person in 2020 and 2021 unemployment benefits tax-free. So for a married couple that is $20,400 if both were on unemployment.
It is only allowed if your Adjusted Gross income does not exceed $150,000. Single or married or Head of Household. Nothing in the bill talks about a phase-out, so we assume this $150,000 is a cliff.
We have reviewed returns already filed and know which clients can qualify for this change.
First, the IRS has to change forms to take advantage of this.
Then our software company has to change the software so we can correct your return.
- If your return is already filed, we will amend your 2020 return as soon as the change is available.
- Any returns in the queue in our office will continue to be processed and a DRAFT return will be sent to you for review. We will inform you why you are getting a Draft return.
Once the software is updated, we will send you a final return to sign for filing.
NEW STIMULUS $1400 PAYMENTS
The new stimulus payment phases out if your income exceeds these “Adjusted Gross Income” limits:
(1040 Line 10C, 1040-SR line 11)
- Single $75,000 – $80,000
- Married $150,000 – $160,000
If your income is slightly over these amounts, deductions for IRAs, HSAs, or other retirement plans could do double duty in not only getting you a deduction but also qualify you for the new Covid Stimulus.
We will be monitoring your returns for this opportunity.