As you were likely aware, President Biden & Congress have been working on a major piece of tax legislation to provide financial relief to individuals impacted by the COVID pandemic. As of today, Congress has passed this legislation and President Biden signed it into law last Thursday
“The American Rescue Plan of 2021”, as this legislation is called, provides for:
- Another round of $1,400 per person stimulus checks to taxpayers with incomes below certain thresholds ($75,000 single or $150,000 married)
- Making significant changes to the child care and dependent credits for 2021, increasing the credit from $2,000 to $3,000 or $3,600 depending on the child’s age
- Changes to COBRA benefits,
- Changes to the health care premium tax credit subsidy
- An extension of unemployment benefits and the ability to exclude some 2020 unemployment from taxation.
One of the unique aspects of this law is that certain items are applicable to 2020 tax returns. For instance, certain taxpayers may be eligible to have up to $10,200 of their 2020 unemployment compensation treated as tax-free.
This new legislation may possibly impact your 2020 income tax return, and also your 2021 tax planning. Because of this, we are putting a pause on preparing and filing any 2020 tax returns until we have had a chance to analyze the legislation in detail and get clarification on some items. If we have already filed your return, we will be taking another look at it to determine if this legislation impacts you and if we need to amend your return.
While not certain at this point (and no indication from the IRS), it seems possible if not likely that the tax filing deadline may get extended.
We will keep you posted as to the impact this new legislation will have your tax return and your financial plan.
