The Senate version of the $1.9 trillion Covid relief bill includes a tax break on unemployment benefits that, if signed into law, will no doubt be welcomed by those tallying up their 2020 tax bills. The provision exempts the first $10,200 in benefits received last year from federal income taxes for households that earned less than $150,000 – saving roughly 40 million taxpayers as much as $25 billion.
The problem, as The Wall Street Journal’s Richard Rubin reports, is that as of late February more than 45 million people have already filed their taxes for 2020. That means millions of people may have to amend their returns to take advantage of the rule change. On top of that, the IRS will need to reprogram its computers to incorporate the new tax break. Both situations will further stress a tax agency that is already struggling to keep up during the pandemic.
Some tax professionals say it’s time for Congress to delay tax day. “It makes it really hard on the tax practitioners,” one accountant told Rubin. “Nobody really cares about us, but it just makes it so difficult. You’re laughing. We cry.”
At least two lawmakers agree. Reps. Richard Neal (D-MA), chair of the tax-writing House Ways and Means Committee, and Bill Pascrell (D-NJ) released a statement Monday calling for a delay. “Facing enormous strain and anxiety, taxpayers need flexibility now,” they said. “We demand that the IRS announce an extension as soon as possible.”
Former IRS Commissioner John Koskinen told Rubin that the IRS would probably have to stop processing tax returns for a few days if the tax break is signed into law, in order to make the necessary adjustments. “You really are trying to fix the plane when you’re flying it,” he said.