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GettyMillions of people who received unemployment benefits in 2020 are in for a pleasant surprise. On March 11, President Joe Biden signed his $1.9 trillion coronavirus stimulus package into law. It includes a tax break on up to $10,200 of unemployment benefits earned in 2020. And to help confused taxpayers, the IRS plans to automatically adjust your return if you qualify for this break but filed your taxes before the latest guidance was released.
Normally, unemployment benefits are fully taxable by the IRS and must be reported on your federal tax return. This tax break will be welcome news for the millions of Americans who lost their jobs or some income and were forced to file for unemployment during the coronavirus pandemic. Some of these Americans were already hit with an unexpected tax bill because they owed more taxes than expected on their unemployment benefits.
Here’s how the tax break works, and how you can claim it on your taxes.
What’s Changing With Taxes in 2021?
How the $10,200 Tax Break Works
As we’re in the middle of tax season, the rollout of this tax break is unfortunately a little complicated, and will be challenging for the IRS to administer—and for ordinary Americans to take advantage of….
