Bring on the E-Filings! Tax Firms Set for Benefit Twist

Couple doing taxes.

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If you were one of the 40 million Americans to have received unemployment benefits last year, tax preparers are ready for you now. 

Major tax preparation firms including H&R Block, Jackson Hewitt, TaxAct, and TurboTax said they have updated their software to account for the tax break on unemployment benefits included in the just-passed American Rescue Plan (ARP). As for the millions of Americans who have already done their taxes, the IRS plans to issue automatic refunds so they won’t have to file amended returns, IRS Commissioner Charles Rettig said last week.

Under the ARP, the first $10,200 of unemployment payments received in 2020 are tax-free for taxpayers with incomes under $150,000—a provision meant to avoid saddling those who’d already lost their jobs during the COVID-19 pandemic with another burden: a surprise tax bill. Sounds great, except that tax preparers and taxpayers alike were unprepared for the change, and tax season opened a month before the measure was passed, so millions of Americans had already filed their taxes. 

“As of March 19, H&R Block is ready to help people with 2020 unemployment income file their taxes and benefit from the provision in the American Rescue Plan. Whether using our DIY products or working with a tax pro,” H&R Block said in an emailed statement, taxpayers will find that “our services are updated to handle this tax change on federal returns.”

The IRS had previously said it was working with tax preparers on the software updates and has created a new worksheet for tax filers to make their calculations on the tax break.