Hello everyone, and welcome to this episode of Ignition Time.
In this episode, we're going to explore some new details
about the $10,200 unemployment tax break.
Not only has new information emerged from the IRS about who can file,
who cannot file, but there are new guidelines about whether married couples should be
filing jointly or should actually file separately to get a bigger tax break.
Welcome to this episode of Ignition Time, everyone.
This right here is a little bit of information about me.
You learn more about who I am,
what my journey has been like, and why you should listen to me.
My name is Dr. Nitin Chhoda.
Welcome to this episode of Ignition Time, where we cover important matters
pertaining to the country, the economy, as well as your money.
Let's get started. Let's start with an interesting article
on your screen that was published by Bloomberg.
You'll get a link to the article in the description section below.
The unemployment rate is 2.9% in South Dakota.
This actually shows you how uneven the recovery is throughout the country.
Now, remember, the unemployment rate across the country was just around 3%
before the pandemic, and then it went as high as 10%,
even greater than 15% in some states at the height of the pandemic.
The fact that the unemployment rate is
down to pre pandemic levels is just unbelievable and good for South Dakota.
But again, it shows you how uneven this economic recovery is.
In fact, take a look at this chart on your
screen that shows you how the labor markets diverge across the country.
The unemployment rate in 10 states is
below 4% and in six states is above 8%.
So the job market is thriving in nearly
a dozen states, including South Dakota and Utah.
And at the same time, high unemployment is persisting in Hawaii and New York.
The unemployment rate in February was less
than 4% in 10 states, but double that of more than 8%
in seven other states, including the District of Columbia,
according to brand new data that was released by the Department of Labor.
The national unemployment rate,
in case you're wondering, is 6.2%.
Again, let's show you this chart on your screen
and you'll see that some states are doing significantly better than others.
Now let's shift gears to the $10,200 unemployment tax break.
On your screen, you'll see this article from The Wall Street Journal,
an unexpected $10,200 unemployment tax break, What to know.
You'll get a link to this article in the description section below.
So the first question is, what's in this new provision?
The new provision exempts up to $10,200
in unemployment benefits from federal taxes for the year 2020.
This does not apply to unemployment payments in 2021.
So keep that in mind. Now, this exemption is per recipients.
So a married couple who each let's say both the spouse has got $10,200
in unemployment benefits, would get an exemption of up
to $20,400 in unemployment benefits.
Now there is an income limit.
If your adjusted gross income for the couple was less than
$150,000 then you would be able to have this exemption.
But if the adjusted gross income is greater than $150,000
then this exemption does not apply.
Now, this $150,000
limit applies to all types of returns, whether you're a single filer,
head of household, married, filing jointly or married, filing separately.
So keep that in mind.
The second question, what do you do if you have not yet filed your 20-20 taxes?
Well, the IRS posted some guidelines
that show you the IRS guidelines on your screen and will provide you with the link
to these guidelines in the description section below.
So basically, they provided a worksheet
on how to claim the exemption for unemployment payments in 2020.
Now, here's something interesting. There was a change.
There was an amendment from the IRS about how to claim this exemption.
The new the new update is that hundred
fifty thousand dollars does not and should not include unemployment pay.
So the IRS has actually updated the guideline because if you received
unemployment benefits in 2020, those unemployment benefits will not count
and should not count towards a hundred fifty thousand dollar annual limit.
As a result of this amendment from the IRS, more people will not qualify
for the ten thousand two hundred dollar unemployment tax rate.
Now, the next question is, what if you've already filed your 20-20 return?
Should you amended?
The good news is no, you don't need to amend it.
According to new guidelines from the IRS,
they do not want you to file 20-20 returns and they should.
Brand new guidance that was actually dated the 24th of March a couple of days ago.
They said they will announce more details as quickly as possible.
And they said they hope to refigure the taxes using the new unemployment tax
break and automatically send out refunds, if applicable, directly to filers.
So this is good news.
Now, the next question, and this has been coming up a lot from our
viewers and subscribers in the comments section, should I switch my filing status?
Now, what's interesting is the structure of the tax break.
It's the same income limit of one hundred fifty thousand dollars,
regardless of your filing status, could mean that some married couples
who typically file jointly may actually save by filing separately this year.
This was actually explained in detail in another CNBC article that I'll get
to in just a second, and I'll provide you with the link
to the article and the description section below.
So I encourage you to do your own research and check out those articles before you.
Do something as significant as changing
your filing status as an example from The Wall Street Journal.
Let's say a couple had two hundred thousand dollars of income for 2020
and each spouse had unemployment payments of ten thousand dollars.
Now, in case you're wondering, how is that possible?
Well, it's possible that both spouses went
on unemployment, but they had other supplemental sources of income.
Maybe they got rental income.
Maybe they made a bunch of money in stocks.
They had income coming in from other
sources, but not from their job, which is why they were able to claim unemployment.
I know the whole thing's kind of ironic that couples making two hundred thousand
dollars on unemployment, but that does happen in our country.
Some would argue only in the United States of America.
But let's get back to this.
So if have a couple at two hundred thousand dollars of income for 2020 when
each spouse had unemployment payments of, let's just say, ten thousand dollars,
their joint income in this case would make them ineligible for the new tax break.
But if each earned less than one hundred and fifty thousand dollars and they file
separately in this example, in this example.
Now, in this scenario,
some couples may also find themselves eligible if they make less than one
hundred fifty thousand dollars, depending on how much each spouse makes,
they might also become eligible for the fourteen hundred dollar stimulus
checks because the stimulus checks phase out that seventy five thousand dollars
and they phase out completely at eighty thousand dollars.
So let's say you had the original example of the married couple that originally
filed jointly and made two hundred thousand dollars.
But let's say one spouse made 70 and the other spouse made one hundred and thirty.
In this example, the spouse making 70 would not only
not only be able to get the unemployment benefit tax exemption,
but could also get a fourteen hundred dollar stimulus check because the phase
out of the stimulus check, the fourteen hundred dollar stimulus check
begins at seventy five thousand dollars in adjusted gross income for an individual
filer filing as a single filers with changing the filing status.
And again, this is The Wall Street Journal.
This isn't any shenanigans.
This isn't something that you're not supposed to do.
Changing the filing status is
a technicality that could result in more married couples.
And each case is different. Each case is different.
So you will need to crunch these numbers yourself.
It's probably best if you talk to an accountant and also check out
the articles in the description section below.
But it is possible that a married couple that originally filed jointly can now
essentially get bigger tax exemptions and even stimulus checks by filing
separately for 2020 if they have not filed their returns already.
This entire scenario involving married
couples was explained in more detail in this excellent CNBC article that you
see on your screen, ten thousand two hundred dollar unemployment tax break.
Here's when married couples should file separate returns.
So you definitely want to check out this article.
We will provide you a link to this article in the description section below.
Here's an interesting quote
from Oscar Ortiz, who was quoted in the CNBC article as
a certified public accountant and financial planner based in Tampa.
For the most part, it makes sense to file jointly from a tax perspective.
The numbers are such that you get a little
break, but I always run the numbers and see.
So definitely talk to an accountant, run the numbers and decide for yourself.
And I want our viewers and subscribers to know that I understand.
I understand what you all are going through.
I know that individuals in travel,
leisure, entertainment and hospitality have lost their jobs permanently.
Here's a chart on your screen.
With the long term unemployment trends, the fact that long term unemployment is
increasing, forty one point five percent of unemployed workers have been out
of a job for at least six months, approaching the historical peak.
Take a look at this chart on your screen and you'll see the gray section
on the right side of your screen, which shows you how horrific
the unemployment crisis has been in terms of permanent unemployment.
Individuals who have been unemployed for several months.
During the year 2020,
40 million of our fellow Americans were on unemployment at one point or another.
And for our viewers and subscribers who were among these 40 million
individuals on unemployment and were married, this unemployment tax break
and whether you should file jointly or as a single filer makes a big difference.
I hope this video gave you a good starting point about what to do.
Please check out the links in the description section below.
Do your own research and do what is best for you.
Thank you so much for watching. My name is Dr.
Nitin Chhoda with Ignition Time.
Right here once again is a little bit of information about me.
You'll learn more about who I am,
what my journey has been like and why you should listen to me.
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Thank you so much for watching. I appreciate you.
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