'Every bit helps, but I know I can't rely on it': Americans react to new unemployment benefits a year into the pandemic

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

A new policy adds a federal tax waiver on the first $10,200 of benefits paid to individuals in 2020, and up to $20,400 for married couples filing jointly, with an adjusted gross income of $150,000 or less. About 40 million people received jobless 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.

Sacrificing to make ends meet

In Renton, Washington, 61-year-old Don McDowall tells CNBC Make It he's been able to make ends meet without incurring debt thanks to federal supplements on top of his state's "pretty generous" unemployment benefits. However, he's only been able to do so "as long as I didn't pay into the health insurance market."

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"Interesting tradeoff," says McDowall, who was laid off from his auto job in April 2020. "Like a lot of people, I'm piling up future bills for dental work unattended to because of lockdowns and expense, and a few nagging older-man health issues."

Due to an underlying condition, he has been waiting to receive the Covid-19 vaccine before he takes a new in-person job. At this point, McDowall is coming up on the end of his 52-week benefit year period and will be able to continue aid through the extended Pandemic Emergency Unemployment Compensation, which provides aid to the long-term unemployed.

"This PEUC extension will keep me afloat, barely," he says.

'Every bit helps, but I know I can't rely on it'

In Austin, Texas, Ruth Caporello, 35, says the new tax waiver included in the rescue package could make a big difference to her household's finances. Both she and her husband lost their jobs at nonprofits last year, and only she qualified for unemployment insurance.

She received just over the $10,200 threshold in 2020 and didn't know benefits would be taxed. She already filed her taxes online and now isn't sure how she'll get her money back.

"This is the first year in a while we'll get a refund," Caporello says, "but now I'm wondering if there'll be a delay."

The IRS hasn't yet released formal guidance of how the waiver will be applied, and what taxpayers should do if they already filed their return. According to The Century Foundation, those who've already submitted their returns and received a refund will likely have to file an amended return in order to claim the $10,200 exemption. For returns currently being processed, taxpayers will likely see a delay in their processing and refund, if they're expecting one. However, after factoring in the $10,200 tax waiver, their refund may end up being larger than originally expected.

For her part, Caporello, who has three kids under the age of 5, says their family has gotten used to not relying on government funds in order to get by. Her husband, a filmmaker, started his own business after he lost work last spring. She's working toward her master's degree in clinical mental health counseling.

She says she's also encouraged by more discussions around whether unemployment benefits should be taxed at all. The new $10,200 waiver applies to federal income taxes, and states must decide if they will also offer the break on state income taxes.  Some like California, Montana, New Jersey, Pennsylvania and Virginia already exempt taxes on unemployment. Seven states — Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming — do not levy any state income taxes.

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"It's a good thing to get more back," Caporello says. "Every bit does help. But we're in that season of life, with three small kids, I'm trying to get through grad school and we're trying to buy a house. I don't know when I'll get my refund or how much it will be, but I do know I just can't rely on it."

Some families brace for delays

Biden renewed pandemic unemployment programs before they were scheduled to expire on March 14. But because it can take states several weeks to reprogram their unemployment insurance systems, some families may see a two-week delay in their continued aid this spring. 

Another big source of upcoming delays: Many people out of work since the beginning of the pandemic are coming to the end of their 52-week benefit year. Starting a new claim could take several weeks to process, which Brandy Odie, 41, in Douglassville, Georgia, is already preparing for.

Her husband lost work as a recruiter in March 2020, and she is now the sole earner in her household. They've heard from online forums that it could take up to five weeks to process a new claim in Georgia and continue to collect benefits.

Additionally, their benefits could be lower than what they're currently receiving.

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

However, this rule doesn't apply to those on Pandemic Unemployment Assistance or Extended Benefits, the federally funded program that triggers "on" for select states during times of high unemployment.

Odie's husband draws benefits from PUA. "We might have to use our credit cards for a cash advance to pay our bills," Odie says. Her family already had to rely on credit when her husband's unemployment was disrupted in January, following President Trump's delay in signing the December stimulus package.

She's grateful she's still bringing in income to cover a portion of their bills, but as for taking on debt until her husband's benefit is secure: "That's all we can do."

Check out: What to know about unemployment benefits in the new Covid relief package

Don't miss: Use this calculator to see exactly how much your third coronavirus stimulus check could be worth

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