Did you receive unemployment benefits in 2021? Then you’ll have to sit back and wait to file your federal income tax return until you’ve double-checked that you have all of the necessary figures.
In most states, the deadline to submit a federal income tax return is April 18 this year. There is plenty of time for everyone to fulfill the deadline.
Tax return 2022 and unemployment benefits 2021 connection
People may be perplexed since the regulations for many people altered suddenly last year as a result of pandemic-related relief efforts.
As part of a $1.9 trillion stimulus package enacted into law in March 2021, taxpayers got an unexpected tax relief relative to unemployment benefits obtained in just 2020.
According to USA Today, many individuals will not have to pay taxes on up to $10,200 in unemployment benefits received in 2020 as part of the American Rescue Plan. For married couples, the exclusion was up to $10,200 in unemployment benefits for each spouse.
That little respite did not cover everyone. Only individuals with an adjusted gross income of less than $150,000 in 2020 were eligible for the special provision that waived taxes on partial jobless income.
Unemployment benefits fraud victims may not owe tax this year
This tax season, many victims of identity theft tied to unemployment fraud will hear about the crime. During the COVID-19 pandemic, such fraud has increased as organized criminal rings and other thieves exploit stolen personal data to claim unemployment benefits in the identities of others.
Unaware of identity theft, victims may get an unexpected surprise in the form of a 1099-G tax document. The document, which is provided by a state unemployment agency, shows the total amount of unemployment benefits received throughout the year. Benefits are treated as taxable income by the IRS, and beneficiaries must disclose the 1099-G information on their federal income tax return.
Per CNBC, the payments will be tax-free for the victims. However, there are actions victims should take right away to secure their identities; failing to do so might result in serious financial consequences such as damaged credit or bank accounts being established in their name.