TurboTax and H&R Block customers face delays on $10,200 unemployment tax break in stimulus

H&R Block location
  • TurboTax and H&R Block customers are facing delays accounting for a $US10,200 ($13,141) unemployment tax break.
  • Banks and tax preparers have struggled to deliver stimulus checks and refunds, angering customers.
  • There’s also a backlog in IRS tax-refund processing, which led to a one-month deadline extension.
  • See more stories on Insider’s business page.

President Joe Biden signed a $US1.9 ($2) trillion stimulus plan last week, and Americans are eager to receive their stimulus checks and get tax refunds. But H&R Block and TurboTax customers will have to wait for some of it.

Taxpayers with income of less than $US150,000 ($193,255) in 2020 are eligible for a tax exemption on the first $US10,200 ($13,141) of unemployment benefits from the federal government. According to CNBC, online tax preparers H&R Block and TurboTax haven’t updated their software to account for the changes, with experts saying that taxpayers who are eligible for the tax break should wait to file.

“We’re working around the clock to make updates to TurboTax based on the recently enacted American Rescue Plan so our customers can file with confidence and get their maximum refund,” Ashley McMahon, a TurboTax spokeswoman, told Insider. “We are implementing IRS guidance on unemployment income within TurboTax, and updates will be available in product this evening, March 18.”

H&R Block did not immediately respond to Insider’s request for comment. Earlier this week, however, H&R Block CEO Jeff Jones told Insider that “unemployment is new for tens of millions of people” and he sees people making “mistakes” on their tax filings as a result. He also said he “loves the change to under $US10,000 ($12,884),” in reference to the stimulus tax exemption on unemployment benefits.

At the same time, Jones said this is a very complex tax-filing season and that the Internal Revenue Service hasn’t made any decisions yet on how it will actually execute the change in taxable unemployment benefits.

Terry Algranati, a TurboTax customer based in New Jersey, told Insider that he still is waiting for the second two stimulus payments, and he can’t complete his 2020 tax return because of IRS delays in accounting for the unemployment tax exemption in its software.

“I’m stuck in limbo,” Algranati said. “It’s literally a little under $US4,000 ($5,153) that I can’t get right now, which I could really use.”

According to IRS data, around 53.9 million tax returns have been filed so far this year, which is almost 97% of all returns. And given the changes to the tax system, the IRS is behind on processing nearly 7 million tax returns, causing delays in tax refunds. On March 12, the agency said in a statement that it urges taxpayers to not file an amended tax return while it is reviewing implementation of the new tax laws, which Democrats pushed for to ease the burden on taxpayers.

“The IRS will provide taxpayers with additional guidance on those provisions that could affect their 2020 tax return, including the retroactive provision that makes the first $US10,200 ($13,141) of 2020 unemployment benefits nontaxable,” the statement said.

To continue its efforts to account for stimulus changes, the IRS extended the tax filing deadline to May 17 on Wednesday, which was lauded by House Ways and Means Committee Chair Richard Neal and Oversight Subcommittee Chair Bill Pascrell, who said in a joint statement on March 8 that extending the tax season will lift the “titanic strain” on taxpayers.

-Rep. Richard Neal (@RepRichardNeal) March 18, 2021

Delays in processing stimulus changes are nothing new. When it comes to distributing stimulus checks, JPMorgan Chase and Wells Fargo customers were angry with the delay in seeing an additional $US1,400 ($1,804) in their bank accounts, and CNBC reported that TurboTax deposited the third stimulus into the wrong account for some people, making it inaccessible.

The IRS added in its statement that it will work with firms to update current tax software. McMahon said she expects TurboTax software to be up to date by Thursday evening.