More Stimulus Money on the way for many. Higher taxes on the way for many as well!
The latest round of stimulus payments, on top of the backlog left from the 2020 IRS slowdown in processing 2019 returns and the constant new tax rules coming out of the legislature, has produced a “HOT MESS” resulting in the extension of the federal income tax filing deadline for the second year in a row, this time to May 17th. Last week we cautioned that some sates might not follow suit, so be sure to check and see whether or not your state is following suit. A few things are now more clear:
- If you have already filed and had unemployment benefits taxed, there is no need to amend your return. The IRS will do a fix sometime this Summer and send refunds automatically.
- If you received unemployment in 2020 but haven’t filed yet, tax software companies have made adjustments to remove the appropriate taxable portion.
The exemption from taxation of some unemployment benefits creates the same issue as federal time line extensions, as each state will have to decide whether or not they will also extend that same partial exemption.
Another item people might not have thought about is the funding of IRAs and SEPs, which is normally allowed up to the April 15th filing deadline, but has also been extended to May 17th. Fortunately, this should not create a state issue, since when taxable income is removed at the federal level, it generally flows to the state returns in these situations.
OK, great. But the Blog title said “Higher taxes on the way for many as well!”?
Biden and Congress will be dropping that hammer soon, and the trickle-down effect will touch all but the poorest of us.