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    Update on IRS Issues for this Tax Season

    Submitted by Richard Allen, EA, AFSP

    This information comes from the information within the American Rescue Plan Act of 2021 which is still being finalized in Congress before being passed in a final version and sent to President Biden for the enactment. Additional information comes from a monthly IRS Liaison web meeting on March 4, 2021.

    How would the American Rescue Plan Act (3rd stimulus bill) affect unemployment payments? If you’re already receiving unemployment benefits, payments would generally be extended for another 25 weeks, until Sept. 6. The weekly supplemental benefit, which is provided on top of your regular benefit, will remain $300 but run through Sept. 6.

    Although unemployment benefits are taxable, the new law would make the first $10,200 of benefits tax-free for people with incomes of less than $150,000. This applies to 2020 only.

    If a practitioner has not yet filed a 2020 tax return with unemployment benefits on form 1099-G. At this time, it may be a good idea to ask the client to hold up filing a 2020 return until this American Rescue Plan Act has been signed into law and more instructions become available from the IRS.

    If I already filed my 2020 taxes, how do I claim that new tax break? It’s not yet clear, but you may have to file an amended return, according to a Senate aide. The Internal Revenue Service has not issued formal guidance yet. (But here’s hoping they figure out a way to make it happen automatically.)

    The American Rescue Plan Act is currently about 591 pages long with many spending provisions and other provisions which may affect taxes. We will need to look at other tax provisions later.

    How big are the stimulus payments in the bill, and who is eligible? The stimulus payments would be $1,400 for most recipients. Those who are eligible would also receive an identical payment for each of their children.

    To qualify for the full $1,400, a single person would need an adjusted gross income of $75,000 or below. For heads of household, adjusted gross income would need to be $112,500 or below, and for married couples filing jointly that number would need to be $150,000 or below. To be eligible for a payment, a person must have a Social Security number.

    Is there a partial payment for higher earners? Yes. But payments would phase out quickly as adjusted gross income rises. For single filers, the checks decrease to zero at $80,000. For heads of household, the cutoff is $120,000. And for joint filers, the checks stop at $160,000. Payments for children decrease in the same way.
    Do college students count as eligible dependents? College students whom qualifying taxpayers claim as dependents are eligible. (They were not for past payments.) The payment would go to the parent taxpayer, not the child.

    Do older relatives who live with us count as eligible dependents? Good news here, too. If claimed as dependents, these relatives are also eligible this time. The payment would go to the qualifying taxpayer, not the dependent adult.

    Which year of income determines eligibility for this 3rd Stimulus Payment? The most recent year on record at the Internal Revenue Service. If you’ve already filed your taxes this year, it would be 2020. If not, it would be 2019.

    When could I expect my payment to arrive? During the last round of payments, the I.R.S. got the first payments out within a few days. As before, you would track the status of your payments via the I.R.S.’s Get My Payment tool. Be aware that the volume of users sometimes overwhelms the site.
    What should I do if I still haven’t gotten a payment from a past round of stimulus?

    If you were in fact eligible to receive it, you can try to recover it through the so-called Recovery Rebate Credit when filing your 2020 return. Make your claim on Line 30 of Form 1040 or 1040-SR.

    Recovery Rebate Credit. The IRS has issued all of the First and Second Economic Impact Payments (EIP OR Stimulus Payments) that they have been able to do. If the IRS Get My Payment tool DOES NOT SHOW PAYMENT DATES, then take the credit on 1040 Line 30 Recovery Rebate Credit. If the tool says “payment not available” that means not payments were issued, and take the credit on 1040 Line 30 Recovery Rebate Credit.
    If a client forgets to take the Recovery Rebate Credit, and 1040-X Amended Return must be submitted. (This can be e-filed for 2020.) If the client has no entry on Line 30 Recovery Rebate Credit, the IRS will not check for any Recovery Rebate Credit calculation.
    If the client does not have the correct First and Second Economic Impact Payments (EIP OR Stimulus Payments), this may significantly delay the processing of the return and any refunds. Client received EIP payment by a debit card and lost or shredded the card. The IRS says people who lost or got rid of their Economic Impact Payment debit card can request a free replacement by calling Metabank, the U.S. Department of Treasury’s financial agent, at 800-240-8100. Also check them out at

    Virtual Currency Question on 2020 return. If a taxpayer ONLY BOUGHT Bitcoin or other virtual currencies, but DID NOT SELL any, the answer is NO.
    Preparers are having trouble getting the IRS to acknowledge Form 2848 Power of Attorney forms already submitted. Many of these are still in the IRS work queues. Many IRS employees are still working remotely and at greatly reduced working hours. If using Practitioner Priority Services, practitioners may be asked to send in a Form 2848 with the client’s actual signature.
    IRS still has delays in processing responses by taxpayers to original IRS notices. When the IRS sends a follow up notice, respond to the follow up with a copy of the original notice.
    Illinois e-filed refund processing. An IDOR representative said that bank deposits are taking 4 to 6 weeks to process their refunds to the taxpayers. Some taxpayers are taking a subtraction for Unemployment Benefits on IL Schedule M, line 37 (“Railroad sick pay and unemployment income”). This subtraction is only for RAILROAD UNEMPLOYMENT COMPENSATION, not the IDES 1099-G for any other workers.

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