The problem? With tax season underway, millions of Americans who lost their jobs thanks to the coronavirus crisis might soon discover that they unexpectedly owe thousands of dollars to the IRS. Lawmakers could prevent this wave of surprise tax bills by adding a fix to the $1.9 trillion coronavirus relief package that’s currently moving through Congress. But so far, efforts to do so seem to be stalling out.
A senior Democratic aide told me that, as of now, he thought the chances legislators would act were “slim to none,” and described the failure as “political malpractice.”
While unemployment benefits have long been considered taxable income, recipients are often unaware of that fact until it’s time to file. Under normal circumstances, this is not necessarily a disaster, since people tend to stay on unemployment for relatively short stints of time. But the past year has been different. A historic number of households fell back on unemployment insurance to survive the pandemic, and some have collected well over $10,000 or even $20,000 in aid thanks to the enhanced benefits Congress enacted.