Knowledgebase : Tax Topics

EIP 3 Payments: Treasury successfully processed 90 million payments this past week using direct deposit for the stimulus (EIP 3) payments representing about $242 billion.  In addition, they did send out approximately 150 thousand checks for $442 million for EIP recipients.   The next round of EIP 3 for this coming week will be about 30 million payments. The IRS expects to continue to send out payments weekly until they cover everyone in which they have information.  

Other Elements of the Relief Act that impacts the Tax Preparation community:   There were also a number of tax law changes in that bill that impact taxpayer not only for next year but also this current filing season.  

Unemployment Compensation Exemption The act makes the first $10,200 in unemployment benefits tax-free for 2020 tax returns in this current filing season.  This retroactive benefit is intended for each person with incomes less that $150,000.   The IRS will be providing guidance soon on how to handle this feature on not only already filed returns, but also for 2020 returns you are preparing now and in the future.  Look out for news from IRS very soon on this topic.  

Child Tax Care Credits Increased The act also increased the amount of the tax credit for 2021 tax returns for next tax season, to $3000 per child, as well as liberalizing some of the rules on the existing credit.  One of the features in the act was to instruct the IRS to make prorated payments of this new credit to those qualifying starting later in 2020.    

The IRS will provide guidance on this feature later in the year as well as instruction on options and tools to opt out of the prepayment feature.  

Returns filed with unemployment benefits prior to the $10,200 exclusion should not be amended. The IRS has indicated it will refigure taxes on these returns and adjust the taxpayer’s account accordingly. The IRS will then send any refund amount directly to the taxpayer.