Due in part to the ongoing COVID-19 pandemic, 25 million Americans received unemployment benefits from the federal government in 2021. As a result, it appears that these 25 million Americans will not be eligible for any tax relief this year. However, the year 2021 has passed, and it appears that Congress will not pass a bill similar to the American Rescue Act this year.
According to a CNBC article titled “25 million people got unemployment benefits in 2021,” this is true. “Households that didn’t withhold federal tax from benefit payments (or withheld too little) may owe money or receive a smaller refund during the 2022 tax season” by Greg Iacurci – “Households that didn’t withhold federal tax from benefit payments (or withheld too little) may owe money or receive a smaller refund during the 2022 tax season.”
According to CNBC, Democrats passed the American Rescue Plan Act in March, which exempted up to $10,200 in unemployment benefits per person from federal taxation in 2020. This year, however, it appears that such tax relief will not be granted. According to CNBC, this is because Congress has yet to pass a law providing similar tax relief or breaks on unemployment benefits this year.
There will be no more tax breaks
According to this CNBC article, if households did not withhold federal tax from their unemployment benefits or withheld too little, and there is no current real promise of further federal unemployment benefits tax relief this year, they will be responsible for their respective tax payment on unemployment benefits received in 2021. This is because unemployment benefits are usually not tax-free, and the benefits provided by the American Rescue Plan last year are no exception.
It remains to be seen how much this news will affect those who received such unemployment benefits and are still economically impacted by the COVID-19 pandemic. However, the current unemployment rate in the United States of America is around 4.2 percent, the lowest it has been since February 2020, according to CNBC.
As a result, the current federal and governing authorities in the United States do not believe it is necessary to provide any additional tax relief on unemployment benefits, at least for the time being. However, it remains to be seen whether such a decision will be remembered by the American people.