A new law recently passed as part of President Joe Biden's American Rescue Plan states the first $10,200 in unemployment benefits for single filers won't be taxed, as well as the first $20,400 for married or joint filers.

But this law was passed in the heart of tax season, meaning many people are currently filing their 2020 tax returns. So what if someone has already filed their return and reported the unemployment compensation as taxable?

Christopher Cicalese, manager at Alloy Silverstein Accountants in Cherry Hill said do nothing. The Internal Revenue Service doesn't want anyone filing an amended tax return at this time. Most likely what will happen is that the IRS will try to figure out an easier way for there to be a mass refund or a mass recalculation where they can use the computer power of the IRS to automatically adjust everyone's tax returns.

The problem is that everyone's tax software, no matter who the tax preparer is, does not have the latest coding. If someone were to manually go in and amend the return, Cicalese said there is the potential to mess up a different calculation.

"It starts to get really confusing when you're looking at the tax law that was passed and looking at the prior tax law that is still in place," said Cicalese.

Cicalese said if someone has not filed taxes yet and potentially was in any situation where he or she had something that's going to change, hold off on filing if possible. By the end of the year, everyone should be made whole. But it's going to take time and it's up to the IRS to be able to process all this information within a reasonable time frame.

Because the tax software does not have the coding in it to not tax the unemployment compensation, the IRS needs to update the forms as quickly as possible to reflect the new law passed in The American Rescue Plan. That information will then be given to software companies, which, in turn, will need to write new tax codes to update the software. From there, the codes go to the tax preparers.

So, Cicalese said basically everyone who filed returns with unemployment compensation or have unemployment benefits and have yet to file, are in a holding pattern right now.

"I could expect the IRS is going to have to come out with something in the next couple of weeks because the deadline is already around the corner and possibly they might even extend the return filing date," said Cicalese.

Last month, the IRS said it had no intention of extending the due date for tax returns but Cicalese said with this new law in place and the confusion that comes with it, extending to June 15th is a possibility.

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