money Coronavirus stimulus: What you need to know about unemployment benefits
With the Senate and House passing the $1.9 trillion stimulus deal and the legislation waiting to be signed by the president this week, Americans who are jobless or were at some point in 2020 would benefit from this round of relief.
Under the new legislation, jobless Americans would continue getting an extra $300 a week until September 6, while three other key unemployment programs would be extended. Millions of Americans also would get a tax break on their unemployment benefits.
"This stimulus package is really directing economic relief to those who need it," Andrew Stettner, an unemployment insurance expert and senior fellow at the Century Foundation, told Yahoo Money. "While the benefits in some way were a little more generous at the beginning of the pandemic, there are other things that were put in place like the $1,400 stimulus check and an increase in the child tax credit."
Even if the legislation is signed this week by the president, there could still be a two-week lapse in unemployment benefits after those key programs expire on March 14.
Out of the $1.9 trillion legislation, around $350 billion would go to the unemployment system, according to the Committee for a Responsible Federal Budget. Here’s everything you need to know.
Extended programs
Under the plan, unemployed workers would continue getting an extra $300 a week in Federal Pandemic Unemployment Compensation (FPUC) through September 6. Workers on Unemployment Insurance (UI), Pandemic Unemployment Assistance (PUA), and Extended Benefits (EB) would also get the extra payment added to their core weekly unemployment benefits.
"It's continuing the benefits that have done an amazing job keeping people out of poverty and continuing them at least through September 6," Stettner said, "to a point where the vaccination program should be moving forward and I do think job opportunities will really open up."
The PUA and the Pandemic Emergency Unemployment Compensation (PEUC) programs are set to expire on March 14. That would leave around 11.4 million jobless workers without any unemployment benefits this spring. Both of those programs would be extended under the new bill.
PUA currently provides benefits to over 7.3 million workers who would not otherwise qualify for regular benefits like contractors, self-employed, and other workers. The program would be extended by another 25 weeks through September 6, allowing those jobless Americans to get a maximum of 75 weeks under the program.
The PEUC program, which provides benefits to those who have exhausted their benefits under UI and PUA, would also be extended by 25 weeks bringing the total of weeks under that program to 49. Currently, 4.5 million Americans rely on PEUC.
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The legislation would also extend the Mixed Earner supplement (MEUC) program. Under it, some “mixed-income” earners who get income from both traditional (W-2) and self-employed (1099) sources would continue to get an extra $100 on top of the extra $300 a week until September 6.
Tax forgiveness
Both regular unemployment benefits and the jobless benefits provided by the stimulus legislation are subject to income tax. But the newly added tax exemption is for the first $10,200 of unemployment benefits; any benefits above that threshold would be taxable. The break would apply to the 2020 tax year and only for households making up to $150,000.
The break would increase a taxpayer's tax refund by about $1,000 or reduce their tax liability by the same amount, according to estimates from Stettner.
"The surprise tax bill that a lot of people got on unemployment was really disappointing and confusing and anxiety-producing," he said. "Easing that, I think, it can psychologically help a lot of people right now."
Read more: Here's what's in Joe Biden's $1.9 trillion 'rescue plan' that could help your wallet
Withholding taxes on your unemployment benefits is voluntary — recipients can choose to withhold a flat rate of 10% of their unemployment benefits. If they haven't chosen to withhold any tax, they must pay it when filing their taxes.
If you have already filed your taxes and they have been processed by the IRS before the time the legislation becomes law, you would likely have to file an amended tax return to get the tax break.
"If you have not filed already and this is important to your tax picture, you probably want to wait to file," Stettner said.
Denitsa is a writer for Yahoo Finance and Cashay, a new personal finance website. Follow her on Twitter @denitsa_tsekova
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