2021 COVID Relief Tax Updates

The American Rescue Plan was signed into law by President Biden on March 11, 2021. The plan includes new tax rules that may impact you in a number of ways. Key updates below.

Unemployment benefits partially tax-free

  • The first $10,200 of unemployment benefits is now non-taxable on the federal return for individual filers ($20,400 for joint filers if both have unemployment).
  • Unemployment benefits are still fully taxable on the Minnesota return and must be included in income when figuring renters or homeowners refund.
If I received unemployment in 2020, should I wait to file?

At P+P, we are not recommending that you wait to prepare a return, however we urge you to be cautious and check to make sure the new tax rules for unemployment benefits are on your return. Many software companies have updated their software for the federal deduction, but state updates may take longer to apply.

For returns prepared by P+P volunteers, we will provide you special instructions, if needed, when we call to notify you that your return is done.

What if I received unemployment in 2020 and I already filed?

As of March 23, 2021, the IRS has decided that if you have already filed your federal taxes for 2020, you do NOT need to refile. The IRS will fix your return and adjust your refund accordingly. The IRS will send any refund amount directly to you.

Note: This only applies to federal returns only.

New Economic Impact Payment (stimulus check)

The new Economic Impact Payment will not impact tax returns for tax year 2020. Most people will receive their payment without taking additional action. The IRS started sending payments on March 17.

Qualification for the third payment is based on your 2019 or 2020 tax return information. To check on the status of your payment, you may check Get My Payment on the IRS website.

What’s different about this payment?

This payment is larger than the previous payments at $1,400 per person (within eligible income limits). This round of payments will include additional amounts for all dependents, including people over age 17.

You and all dependents must have a Social Security number (SSN) to claim the payments. If you file jointly, a spouse with the SSN and dependents with SSNs are eligible, but a spouse or dependent with an ITIN is not.

FAQ + Additional Resources

How can I check the status of my refund?
  • If you have submitted your tax return and are waiting to receive your refund, you can check the status of your federal and state returns, respectively via the IRS and MN Department of Revenue (MNDOR) websites. Follow the links below.
    • IRS
      • COVID-19 has delayed the processing of paper tax returns and communication with the IRS related to tax returns.
    • MNDOR
I am having trouble contacting the IRS. Can P+P help me?
  • If you have contacted the IRS and are having continued problems, we recommend contacting your federal representatives who can contact the IRS on your behalf. Note: you will need to complete a release form to authorize your Senator/Representative to contact the IRS on your behalf).
I want to receive my tax refund and/or EIP sent to me as a direct deposit, but I don’t have a bank account.

Prepare + Prosper offers the FAIR Banking program in partnership with Sunrise Banks. For more information and/or to schedule an appointment to enroll (virtually), visit the FAIR website.

Additionally, Prepare + Prosper offers a CFR Focus prepaid debit card available regardless of your banking history, no minimum balance requirements, no monthly fees, and large ATM network. Interested in a Focus card? Email Abbie (abby@prepareandprosper.org) or 651-262-2170.