DETROIT (FOX 2) - Earlier filers for the tax season may need to make some changes after the American Rescue Plan is making a massive change to taxes on unemployment money.
Tax season is here and, for many people, filing as soon as possible is standard. For anyone who collected unemployment funds in 2020, they may have already paid thousands to the government. That's complicating matters for the Internal Revenue Service.
When the American Rescue Plan was signed in February, it sent thousands of dollars in stimulus money to Americans. But it also waived taxes on the first $10,200 of unemployment benefits if your gross adjusted income was under $150,000.
Financial planner Kirk Cassidy explains that this is going to take some time to sort out.
"I think everyone needs to take a deep breath and slow down. So everyone can get some time to organize and prepare for this change," said Cassidy.
This is the biggest retroactive tax change in three decades. Then consider this: 42 million people have already filed their taxes plus an enormous backlog from last year's taxes.
"Everyone who already filed their returns, 42 million people, they’re going to have to amend those returns," said Cassidy. "The IRS is already behind from last year‘s tax returns, they haven’t done 7 million tax returns and they are sending out penalty letters to people who have already filed."
To top it all off, Cassidy said software companies haven't updated their programs with the new laws.
"Software companies, the tax software, like TurboTax and other professional software haven’t been updated with these changes," he said.
So instead of rushing right out to file your taxes, he recommends everyone slow down. Take advantage of the extra time, which is now set for May 17, eight weeks after the standard deadline of April 15.
During that time, Cassidy said to get your documents in order, make sure your identity hasn't been stolen, and give your tax preparers time.
Unless, of course, you owe money. That's still due by April 15.