Hello everyone and welcome to this new episode of Ignition Time. Now if you remember
last year in 2020, the tax filing deadline had to be pushed back. Well guess what? Economists
and many many individuals including accountants are asking the IRS to push back the tax filing
deadline this year as well. And the big reason for that is the new tax break or $10,200 tax break
per household making up to $150,000 if a member of the household is receiving unemployment benefits.
This makes the first $10,200 in tax breaks non-taxable as far as unemployment benefits
are concerned, as long as the household income was under $150,000. In this video I'll dig deeper
into this and I'll tell you what the implications are for you specifically if your annual combined,
if your annual gross income, your combined household income is under $150,000 and if a
member of your family is receiving unemployment benefits. Welcome to our channel everyone.
My name is Dr. Nitin Chhoda. This right here is a little bit of information about me.
My specialty is that I make it rain money, check that out, it's raining money. Well
I wish I could but I don't have those superpowers. I do have a crystal ball and I can predict
the future. Actually I can do neither of those things but what I can do is tell you the truth,
to give you information. What I can do is give you information that helps you understand how
the country is working, how our economy is working and by extension what impact it has to your money.
So let's just jump right in. During the year 2020 as many as 40 million of our fellow Americans were
on unemployment at one point or another. At this moment in time there are approximately 15 million
of our fellow Americans who are on unemployment but the actual statistics are likely to be even
higher because there are many individuals who have actually dropped out of the workforce. So the true
unemployment rate is likely to be closer to 10% according to the chairman of the federal reserve
Jerome Powell and according to the US treasury secretary Janet Yellen. But here's the thing,
for 40 million of our fellow Americans who received unemployment benefits
at one point or another in the year 2020 there are huge implications because the new law that is
about to be passed by the house, I should say the new bill that's about to be passed by the house
which when signed by the President technically that's when it becomes law. That is going to
impact 40 million of our fellow Americans. Here's the headline of an article published by the Wall
Street journal, congress is poised to append tax season with new break for unemployment benefits.
The exemption of $10,200 for unemployment benefits is going to help households and it's going to be
good news for a lot of our fellow Americans. But for accountants as well as lawmakers and
economists it's a huge headache because they have a lot of things to factor into as the April
15 traditional deadline is approaching. That deadline is less than 6 weeks away at the time
I'm recording this video. So here's what's going on this new move that was approved by the senate
and that is expected to pass the house sometime tomorrow is is part of is part of this massive
1.9 trillion dollar stimulus package this would exempt the first ten thousand two hundred dollars
in unemployment income for households that made under 150 000 combined so this is interesting
now this would save households approximately 25 billion dollars but implementing this change is
going to be very challenging for the irs which is already completely overloaded because a lot of
questions are emerging hey what if i already paid my taxes what if i already filed my return how am
i going to get the money back are they going to mail me a check is it going to be a credit
all of these questions we're actually looking for answers to all of these questions and a lot
of tax professionals themselves don't know the answers to all of these questions now as of late
february 2021 this year the irs has already received more than 45 million tax returns
and some of them will likely have to be amended because individuals on unemployment
who are under the impression that they had to pay taxes to the federal government already paid those
taxes so those tax returns will have to be amended or the irs will simply have to mail back the
checks is the irs going to mail a check is the irs going to issue a credit we don't have the specific
answers to those questions right now so the irs will need to reprogram its computers so that
individuals who are supposed to get the 10 200 tax break get that tax break remember this is already
a very messy messy filing season because it's been complicated by the pandemic the irs has many has
many employees who are working from home who don't have access to the traditional infrastructure who
don't have access to the traditional systems in their offices so this is going to be very complex
for the irs some lawmakers and tax preparers are already encouraging the irs to push back the april
15 deadline remember last year in 2020 the april 15 deadline was pushed back to july 15th but the
pressure from lawmakers is mounting here's a quote on your screen from congressman richard neal who's
a democrat from massachusetts facing enormous strain and anxiety taxpayers need flexibility
now and he said we demand that the irs issue an extension as soon as possible he said this in a
joint statement with congressman bill pascrell who's a democrat from new jersey now in a sign
of how challenging this is going to be for the irs the former irs commissioner john koskinen he said
that after the law is enacted the agency the irs would likely have to stop accepting returns for a
few days while it was trying to program and recode its computer systems to in order to enact the new
law which is that the first ten thousand two hundred dollars in unemployment benefits should
not be taxed again this is going to impact 40 million of our fellow americans because 40 million
of our fellow americans were on unemployment at one point or another during 2020 they may have
gotten their jobs back some of them but the fact is that if they received unemployment benefits
they should not be paying taxes on the first ten thousand two hundred dollars
in unemployment benefits and chances are if you're watching this this applies to you as well here's
a comment from the former irs commissioner john koskinen he said you're trying to fix the plane
while you're flying it now as you can imagine the democrats are very proud of this provision here's
a quote from senator dick durbin who's a democrat from illinois the inclusion of our provision
is welcome news to the millions of americans using unemployment benefits to keep a roof over
their head put food on the table and pay for health care and other necessities now here's
what's interesting if you're in the 12 tax bracket you could save more than 1200 dollars because 12
of 10 500 is more than twelve hundred dollars if you're in a higher tax bracket up to a hundred
and fifty thousand dollars combined annual income you could actually be saving more you
could be saving well over two thousand dollars now if your income is low enough where let's
say you don't have any taxes due to the irs then it's not going to affect you much but
out of the 40 million americans who were on unemployment at one point or another this has
implications this has significant implications saving for some people as low as 1200 dollars for
others maybe two perhaps three thousand dollars now i want our viewers and subscribers to know
that this change impacts the 2020 tax returns not the 2021 tax returns i'm sure many of our
viewers and subscribers were on unemployment at some point or another in 2020 because again we're
talking 40 million of our fellow americans on unemployment so this impacts 2020 returns
which you know we're filing as we speak so keep in mind that this also has an impact on state systems
because keep in mind that states charge taxes on unemployment benefits now there are some states
that do not charge taxes on unemployment benefits whereas other states do indeed
charge taxes on unemployment benefits i have done another video talking about state tax implications
on unemployment benefits so make sure you go through the unemployment benefits crash course
on our channel because you'll be able to locate that video but as far as state taxes are concerned
this change this change this law this federal law if you will that impacts your federal taxes also
will impact your state taxes so keep in mind that a lot of state taxes adopt the same provisions
as a federal government so some some states may say you know what you don't even have to pay us
the 10 000 to the the taxes the state taxes on the first ten thousand two hundred dollars but other
states may say no no no you have to pay us even if you don't have to pay the federal government now
according to veranda smith who's a deputy director of the federation of tax administrators which is
an association of state tax agencies states will need to adjust their own computer systems alert
taxpayers and prepare to accept amended returns and keep in mind states don't want an extended
deadline because if there's an extended deadline it costs the states more money because now they
have to arrange for staff honestly the states also want to get all the tax returns over with
just like the irs here's what smith said i'm going to call it a mess they'll figure it out
that is what they do for a living that's it everyone the impact of the new ten thousand two
hundred dollar exemption on unemployment benefits the first ten thousand two hundred dollars
in unemployment benefits exempted from federal income tax okay i said federal income tax
not state income tax because your state may still charge you and is more likely than not going to
charge you state income tax on the unemployment benefits so let's be clear there's federal taxes
and their state taxes for the first ten thousand two hundred dollars in unemployment benefits
for households that make under 150 000 a year there will be no tax no federal tax
on those unemployment benefits for the first ten thousand two hundred dollars now your state
may still charge you tax so my best advice to you would be to talk to an accountant who can
help you file your taxes or talk to your state and get the correct guidelines i am expecting
specific guidelines from the irs about what happens to individuals who've already paid
their federal income taxes who've already filed their returns but yet who are among the 40 million
americans who qualify for an exemption based on the adjusted gross income of the household which
should be under 150 000 thank you so much for watching i promise you i'll keep you posted please
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