Pandemic leads to tax changes

By CHRISTINE HAINES
chaines@yourmvi.com

The most recent COVID-19 relief bill, amended by the U.S. Senate Saturday and up for consideration by the House and signature of the president this week, would eliminate federal income taxes on the first $10,600 of unemployment collected last year.
Tax preparer and licensed financial adviser Pete Jenkins of Pete Jenkins Tax, Accounting & Financial Services in Monongahela, said he began getting notifications about the pending change from his professional associations Monday.
“I’m on all kinds of email lists with the IRS,” he said. “Any time there are changes pending, they send us notices.”
Jenkins said he first heard about the pending change from the National Society of Accountants, then other professional organizations started sending out notices.
“We have about seven different subscription services,” Jenkins said. “I don’t recall getting anything in the middle of tax season like this.”
Jenkins said about 45 million people nationwide have already filed their tax returns, and many of those returns included unemployment income. Jenkins said he has prepared about 400 returns so far this year, about 25% of which included unemployment benefits.
“They will have to file amended returns,” Jenkins said.
He added that there’s no way to know how long it will take the IRS to update its software to deal with the change regarding unemployment income once the legislation receives final approval in the House and is signed into law by President Joe Biden.
The tax savings could add up to thousands of dollars, depending on how much unemployment was collected and the tax bracket of the filers.
“It only affects the federal return because unemployment isn’t taxable on Pennsylvania or local returns,” Jenkins said.
Keith Peer of Keith J. Peer CPA and Financial Services in North Belle Vernon, said each taxpayer who qualifies for the break needs to decide whether they want to file now for whatever return they have coming, then file an amended return once the law is passed and the IRS software catches up, or postpone filing at this time.
I can’t tell you whether it’s going to be four weeks or four months before the IRS updates the software,” Peer said. “I would think it would be a minimum of a month.”
Government officials have been talking about extending the tax season until July 15 like last year, Peer added, but so far that decision has not been made.
Peer said individuals filing their own taxes should be aware that paper tax forms will not reflect changes in the law.
“The printed instructions that you have will be out of date,” he said.
Peer said taxpayers have up to three years to file an amended return as the law is currently written.
There are several breaks available to taxpayers this year that people should be aware of.
Jenkins said taxpayers were able to waive the required minimum distribution from preferred retirement accounts. In the past, people over age 72 were required to begin making withdrawals from retirement accounts, with those payments being fully taxable.
Barry Boucher, a registered tax preparer in Elizabeth, said there are other tax breaks available.
“There’s a $300 charitable contribution you can take without itemizing,” Boucher said.
Boucher said anyone who qualifies but hasn’t received the $600 stimulus check that went out earlier this year may also claim that as part of their tax return or credit toward their tax bill if they owe.
Boucher said most of his clients had some unemployment income, with the majority receiving less than $15,000.
“I have a few in front of me that I know have unemployment that I haven’t touched yet,” he said.
Boucher will most likely suggest that his clients wait until the law is passed and the IRS updates the software to save them the hassle of filing an amended return.

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