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The pandemic resulted in millions of Americans receiving unemployment benefits for the first time in 2020. Relief legislation enacted last year created several federal unemployment programs.
Unemployment compensation is subject to federal income taxes, but many Americans were unaware of this when they received benefits. As a result, people may be surprised when they file their 2020 tax returns this year that they owe money to the IRS or are entitled to smaller refunds than they expected.
The relief package that the House is considering this week extends federal unemployment programs, but it doesn t exempt any unemployment benefits from taxes. The Democratic lawmakers who wrote the letter are sponsors of a bill that would exempt the first $10,200 in unemployment insurance (UI) received last year from federal income taxes, and they want their measure to be included in a manager s amendment to the relief package.