Americans react to new unemployment benefits a year after the pandemic

With the $ 1.9 trillion American Rescue Plan signed into law, unemployed Americans will continue to receive an additional $ 300 per week in federally increased unemployment benefits and will be able to stay on key pandemic-era programs for workers of gig, those who are not traditionally eligible, the long-term unemployed and the mixed wage earners until 6 September. More than 20 million people were benefiting from unemployment benefits in mid-February.

A new policy adds a federal tax exemption on the first $ 10,200 of benefits paid to individuals in 2020, and up to $ 20,400 for couples who take action together, with an adjusted gross income of $ 150,000 or less. About 40 million people received unemployment benefits last year.

Now tens of millions of Americans and their families are waiting for the latest changes to show up in their bank accounts.

In Renton, Washington, Don McDowall, 61, told CNBC Make It that he managed to pay the bills without incurring debt thanks to federal supplements in addition to his state’s “generous” unemployment benefits. However, he was only able to do so “as long as I didn’t pay in the health insurance market”.

“Interesting exchange,” says McDowall, who was fired from his job in the auto industry in April 2020. “Like many people, I am accumulating future dental work accounts unattended because of blockages and expenses, and some older irritating dental problems. men’s Health. “

Due to an underlying condition, he is waiting to receive the Covid-19 vaccine before taking on a new personal job. At this point, McDowall is nearing the end of its 52-week benefit period and will be able to continue to help through the Extended Pandemic Emergency Unemployment Compensation, which provides help to the long-term unemployed.

“This extension of PEUC is going to keep me afloat,” he says.

In Austin, Texas, Ruth Caporello, 35, says the new tax exemption included in the bailout package can make a big difference in your home finances. She and her husband lost their jobs in nonprofit organizations last year, and only she qualified for unemployment insurance.

She received little more than the $ 10,200 limit in 2020 and was unaware that the benefits would be taxed. She has already paid her taxes online and is now unsure how she will get her money back.

“This is the first year in a long time that we will have a refund,” says Caporello, “but now I’m wondering if there will be a delay.”

The IRS has not yet released formal guidance on how the exemption will be applied and what taxpayers should do if they have already submitted their statement. According to The Century Foundation, those who have already submitted their returns and received a refund are likely to have to file a corrected return to claim the $ 10,200 exemption. For returns currently in process, taxpayers are likely to see a delay in processing and reimbursement if they are waiting for one. However, after taking into account the $ 10,200 tax exemption, the refund may turn out to be higher than originally expected.

For his part, Caporello, who has three children under the age of 5, says the family has become accustomed to not depending on government resources to survive. Her husband, a filmmaker, started his own business after he lost his job last spring. She is pursuing a master’s degree in clinical counseling in mental health.

She says she is also encouraged by more discussions about whether unemployment benefits should be taxed. The new $ 10,200 exemption applies to federal income tax, and states must decide whether to offer the state income tax reduction as well. Some like California, Montana, New Jersey, Pennsylvania and Virginia are already exempt from unemployment taxes. Seven states – Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming – do not charge any state income tax.

“It is good to receive more,” says Caporello. “Each part helps. But we are at this time in life, with three young children, I am trying to finish graduate school and we are trying to buy a house. I don’t know when I’m going to get my refund or how much it will be, but I know I just can’t count on it. “

Biden renewed the unemployment pandemic programs before they ended on March 14. But as states can take several weeks to reschedule their unemployment insurance systems, some families may see a two-week delay in their continued help this spring.

Another major source of impending delays: many people unemployed since the start of the pandemic are nearing the end of their 52-week benefit year. Starting a new claim can take several weeks to process, for which Brandy Odie, 41, in Douglassville, Georgia, is already preparing.

Her husband lost his job as a recruiter in March 2020 and now she is the only winner in the family. They heard from online forums that it can take up to five weeks to process a new application in Georgia and continue to receive benefits.

In addition, their benefits may be less than what they are currently receiving.

When someone starts a new benefit year, they usually need to recalculate their payments based on their most recent earnings. The most recent rescue package says that if you are on PEUC and recalculating your benefits would decrease your help by $ 25 or more, you can continue to receive the same weekly benefit amount for a further 52-week period.

However, this rule does not apply to those receiving Pandemic Unemployment Assistance or Extended Benefits, the federally funded program that is activated for selected states during periods of high unemployment.

Odie’s husband benefits from the PUA. “We may have to use our credit cards for a cash advance to pay our bills,” says Odie. Her family was already dependent on credit when her husband’s unemployment stopped in January, after President Trump’s delay in signing the December stimulus package.

She is grateful that she still has income to cover part of her bills, but as for taking on debts until her husband’s benefit is guaranteed: “That’s all we can do.”

Output check: What to know about unemployment benefits in Covid’s new aid package

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