Californian members of Congress are asking the Internal Revenue Service to revive a tax break that expired before workers got their 2020 unemployment benefits, due to so many delays.
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It could bring relief to thousands of California workers whose claims were stuck in the infamous backlog at the Employment Development Department.
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Congress gave out generous unemployment benefits when the pandemic began. The first $10,200 of received benefits was even "tax free."
However, with all the problems at the EDD, tens of thousands of claims got stuck or lost or suspended. By the time many folks got their benefits, the tax break had expired! Now they have to pay the full taxes.
7 On Your Side pointed this out to California's members of Congress, and now they are taking action.
We told you about Nissa Bryant of Santa Rosa. "It feels like a punch to the gut, I feel forgotten," she told 7 On Your Side.
A full year after she was laid off in the pandemic, the EDD still had not paid her any benefits.
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And Crystal Morris of Oakland: the EDD denied her benefits in 2020 -- then a year later admitted it was a mistake, and gave her all the back payments. "They were like, 'No you're not qualified.' And then they just basically hung up the phone," she explained.
By the time they got their money, Bryant and Morris each had gone into debt.
Not only that, they missed out on a big tax break.
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Congress had waived taxes on the first $10,200 of unemployment benefits back in 2020.
But workers like Bryant and Morris didn't get paid till 2021, after the tax break expired.
Now they must pay full taxes.
Or will they?
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"I was excited to hear that there's actually movement on it now," said Morris.
This week, 22 Californian members of Congress wrote a letter to the IRS and Treasury Secretary Janet Yellen.
It says workers who had to wait until 2021 to get benefits from 2020 should still get that tax break.
"It's making things right. It's really important to make everything fair for everyone," Morris said.
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The letter, written by North Bay Congressman Mike Thompson (D - St. Helena) reads:
"Congress clearly intended that $10,200 of benefits in 2020 should be tax-free.... delays at state agencies were plainly not the fault of the taxpayer... they should not be penalized for that error."
It's unclear how many Californians would benefit if the tax break is revived. EDD statistics show more than 300,000 claims were still backlogged at the end of 2020, and another 1.4 million were frozen for investigation.
"To push this through would definitely help a lot of people, especially this year," Morris agreed.
It's not clear if congressional action is needed, or if the IRS can just waive the tax now. But, keep in mind the tax break would not apply to 2021 EDD benefits - it would only be for those that were delayed from 2020. We are getting that question a lot at 7 On Your Side.
Take a look at more stories and videos by Michael Finney and 7 On Your Side.
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