Some, like Indiana and Wisconsin, offer a partial tax break on benefits. In the meantime, please contact us with any questions. Others specifically exclude unemployment income from state tax. We will let you know as soon as additional guidance is issued. We are on hand navigating the constant tax law changes by staying at the pulse of the information. This could add thousands of extra dollars into struggling sole proprietors’ businesses (those who file Schedule C on their 1040).
Moreover, the new guidance allows sole proprietors to use their gross receipts rather than gross profit for calculating their PPP funds. The House of Representatives has now voted to extend the Paycheck Protection Program (PPP) deadline to May 31, 2021, and this is likely to be approved by the Senate and become law. The 1.9 trillion coronavirus stimulus plan that President Biden signed into law in March, known as the American Rescue Plan, waives federal income taxes on up to 10,200 in 2020 unemployment. IRS continues to advise against amending tax returns already filed with taxable unemployment income. Although the IRS has released the updated worksheet used to exclude the income for those who have not filed, additional guidance is promised as we are awaiting to hear from various individual states on their treatment. The IRS has released informal guidance on the American Rescue Plan Act’s changes, which retroactively affect 2020 returns by making the first $10,200 in unemployment benefits tax-free for qualified taxpayers. We are on hand to answer any questions as it relates to the new filing deadline and its effect on your home state. Households with income of less than 150,000 will be able to deduct up to 10,200 unemployment benefits from their 2020 income in filing their taxes this winter or spring. You will however, have until for payments due on your 2020 taxes without incurring additional interest or penalties. For that reason, we would like to reassure you that we are still aiming to work through your 2020 returns through the original deadline of April 15. It’s important to note that the first quarter 2021 estimated income tax payments due April 15 have not been extended for both the federal and the state and must still be paid on time. Springfield Governor Pritzker announced today that the Illinois Department of Revenue (IDOR) will begin issuing refunds to eligible taxpayers who filed their 2020 Illinois Individual Income Tax Return prior to a newly enacted federal unemployment tax exemption. Someone with 150,000 in taxable income would be paying a marginal state tax rate of 6.41 percent. Ron Wyden, D-Ore., a strong proponent of the measure during negotiations in early March, disagreed, arguing the income exemption protects families who struggled during the pandemic.The IRS and our home state of Illinois have announced postponing the deadline for all individual tax returns from April 15 to May 17 this year in realizing the hardship that many taxpayers are still experiencing as a result of the Covid-19 pandemic. "You want to have a system that is balanced where you are encouraging people to work there are so many places in our states that are working for employers right now." "The economy is getting better, and everybody says that when you look at what happens with regard to, if it's too high, it's a disincentive to work," Portman said. Rob Portman, R-Ohio, took issue with the measure being added to the American Rescue Plan, with some opponents saying that it would encourage Americans to stop working. "It's unlike the sending checks to every single American - this provision is at least targeted at people who have lost their jobs," said Adam Michel, a senior policy analyst at the Heritage Foundation, a conservative think tank. What the American Rescue Plan does is exempt the first 10,200 of federal unemployment benefits from your taxable income. Although many of the provisions in the American Rescue plan have been criticized, the tax break is less hotly contested, for example, than the direct payments. In regards to taxes, unemployment benefits are generally treated as income.
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