Democrats urge IRS to help unemployment recipients use tax break

Democrats urge IRS to help unemployment recipients use tax break
© Greg Nash

A group of about 20 House and Senate Democrats are urging the Treasury Department and IRS to "take every effort" to ensure that recipients of unemployment compensation can use a tax exemption included in the coronavirus relief law that President BidenJoe BidenVirginia GOP gubernatorial nominee acknowledges Biden was 'legitimately' elected BuzzFeed News finds Biden's private Venmo account Kid reporter who interviewed Obama dies at 23 MORE signed Thursday.

"We recognize the challenges of implementing this change in tax law during filing season, particularly as millions of Americans have already filed their tax returns for 2020," the lawmakers wrote in a letter sent Friday to Treasury Secretary Janet YellenJanet Louise YellenGOP governors move to cut unemployment benefits as debate rages over effects Judge rejects GOP effort to block tax provision in Biden stimulus bill Growing inflation is Biden's hidden tax on working Americans MORE and IRS Commissioner Charles Rettig. "This underscores the need for Treasury and the IRS to take every action to ensure that all eligible individuals, including those who have already filed their 2020 tax return, are aware of and able to receive this critical relief."

Biden's $1.9 trillion coronavirus relief law includes a provision that makes tax-free the first $10,200 in unemployment benefits that people with income under $150,000 received in 2020. The provision was based on stand-alone legislation introduced by Sen. Dick DurbinDick DurbinSenate Democrats urge Garland not to fight court order to release Trump obstruction memo Sweeping election reform bill faces Senate buzz saw Police reform talks hit familiar stumbling block MORE (D-Ill.) and Rep. Cindy AxneCindy AxneOn The Money: Weekly jobless claims fall to 498K, hitting new post-lockdown low | House to advance appropriations bills in June, July Rural Democrats urge protections from tax increases for family farms Business groups target moderate Democrats on Biden tax plans MORE (D-Iowa), who took the lead on the letter.


The tax exemption for some unemployment benefits has implications for the tax returns that people are filing this year. According to the letter, it could reduce tax bills for those who are unemployed by more than $1,000.

The lawmakers urged Treasury and the IRS to determine whether it would be feasible to automatically make adjustments and issue refunds to unemployment recipients who have already filed their 2020 tax returns, so that taxpayers would not need to file amended returns.

The lawmakers said that if such adjustments are infeasible, Treasury and the IRS should "provide clear, accessible information to ensure eligible taxpayers who have already filed for 2020 can file an amended return as quickly and easily as possible."

"Treasury and the IRS should conduct a robust public awareness campaign to ensure that individuals who received unemployment benefits in 2020 are aware of this tax exclusion and understand the actions that need to be taken to receive it," the lawmakers wrote. "This may be especially important for those who could be eligible for a larger Earned Income Tax Credit or Child Tax Credit with this exclusion, or are newly eligible for these credits."

In addition to Durbin and Axne, signers of the letter included Senate Budget Committee Chairman Bernie SandersBernie SandersSanders: Netanyahu has cultivated 'racist nationalism' Former OMB pick Neera Tanden to serve as senior adviser to Biden Tensions mount among Democrats over US-Israel policy MORE (I-Vt.) and Senate Finance Committee Chairman Ron WydenRonald (Ron) Lee WydenNFL accused of 'systemic racism' in handling Black ex-players' brain injuries Infrastructure deal imperiled by differences on financing GOP governors move to cut unemployment benefits as debate rages over effects MORE (D-Ore.).