When will the system be updated to include the waiver for the unemployment taxes for 2020 that was just signed into the stimulus bill
After the legislation has passed Congress and after the President has signed the legislation and after the IRS has written the rules, regulations and procedures. And after the IRS has changed any forms or schedules to accept the tax code changes. And after the IRS has approved the changes in the TurboTax program that apply to the tax code changes, then it will be available for the users of the tax preparation software.
This can take anywhere from several weeks to several months before it becomes available.
If I were in your situation, I would wait and view how the implementation of the American Rescue Plan shakes out. Since you owe, it would not hurt to wait a week or two and see what details are revealed, if any.
If you file today and make payment in full, you should be eligible for a refund of the overpayment because the unemployment provision will be retroactive to tax year 2020.
If the bill is signed in a few days, it will still take some period of time for the IRS to reveal how it will implement the law and even more time for the software providers to update their software and have it approved by the IRS.
TurboTax is reporting that the American Rescue Plan will include some form of 2020 unemployment relief.
The bill also makes the first $10,200 of unemployment income tax-free for households with income less than $150,000. This provision would be retroactive to tax year 2020 (the taxes you file in 2021).
It is not clear how or when the IRS will implement the new law.
The IRS considers unemployment compensation to be taxable income which you must report on your federal tax return. State unemployment divisions issue an IRS Form 1099-G to each individual who receives unemployment benefits during the year. States vary in how they tax unemployment compensation.
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