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IRS trying to keep up with new stimulus package changes

Tax Document
Posted at 5:00 AM, Mar 19, 2021
and last updated 2021-03-19 15:11:34-04

PHOENIX — The extended tax filing deadline of May 17 is good news for a lot of taxpayers.

That's because some of the tax breaks offered in the new stimulus plan aren't available yet, including a break for Arizonans who collected unemployment benefits last year.

While that income is still taxable, the American Rescue Plan exempts up to $10,200 of the amount if you qualify.

The problem is the new waiver came about a month after the tax filing season began.

That means some Arizonans who received unemployment money already filed without getting the break.
And even now, the most popular tax-filing software hasn't included it in calculations.

Turbo Tax says they're "working around the clock to make updates... We are implementing IRS guidance on unemployment income within TurboTax and expect updates to be available in product by Thursday evening, March 18."

H&R Block tells us they are "awaiting additional guidance from the IRS on how the unemployment exclusion will be implemented. As we have more information from the IRS, we will provide updates on the unemployment benefits section of our Coronavirus Resource Hub."

Right now, the IRS says they are working with software providers and they will provide a work sheet for paper filers. They have not given a date when that will happen.

That's at the federal level.

The state adds another layer of confusion for filers. At this point, the state is not allowing the unemployment tax break.

The Arizona Department of Revenue says "whether Arizona conforms to the American Rescue Plan is now pending the Arizona Legislature's decision."

Also, the department says no decision has been made about extending Arizona's tax filing deadline to match the federal extension date of May 17th. So right now, Arizona taxes would still be due by April 15th.

So what do you do if you qualify for the new unemployment tax break and haven't filed?

Many tax experts suggest waiting until the IRS guidance is offered, tax filing companies catch up and Arizona decides what to do about new tax breaks.

If you did file, the IRS says don't re-file.

"Don't file an amended return yet. It may be possible in the future but hold off at this point until the IRS goes over the new legislation," says IRS special agent Brian Watson.

The IRS could decide to create refunds. The decision is expected soon.

Remember, if you qualify for that federal unemployment exemption, your adjusted gross income must be less than $150,000 and that must include the full amount of unemployment income received last year.

Here's the IRS full statement to us:

"The IRS is reviewing implementation plans for the newly enacted American Rescue Plan Act of 2021. Additional information about a new round of Economic Impact Payments, the expanded Child Tax Credit, including advance payments of the Child Tax Credit, and other tax provisions will be made available as soon as possible on The IRS strongly urges taxpayers to not file amended returns related to the new legislative provisions or take other unnecessary steps at this time.

The IRS will provide taxpayers with additional guidance on those provisions that could affect their 2020 tax return, including the retroactive provision that makes the first $10,200 of 2020 unemployment benefits nontaxable. For those who haven’t filed yet, the IRS will provide a worksheet for paper filers and work with software industry to update current tax software so that taxpayers can determine how to report their unemployment income on their 2020 tax return. For those who received unemployment benefits last year and have already filed their 2020 tax return, the IRS emphasizes they should not file an amended return at this time, until the IRS issues additional guidance."