Americans could exclude first $10,200 of their federal unemployment payments from 2020 income taxes under a new Democratic plan

• Jobless Americans could exclude the first $10,200 in federal unemployment benefits they received from next year's income taxes under a new Democratic plan unveiled on Tuesday.
• "As we grapple with the economic consequences of this pandemic, the bill I'm proposing would provide tax relief to unemployed Americans so they can spend their benefits to support their families and their communities," Sen. Richard Durbin said in a statement.
• The plan attempts to provide financial relief to workers who will owe taxes on unemployment benefits on their 2020 tax returns.

Jobless Americans could exclude the first $10,200 in federal unemployment benefits they received from next year's income taxes under a new Democratic plan released on Tuesday.

Sen. Richard Durbin introduced legislation to omit that amount and provide additional economic relief to unemployed workers. It's equivalent to 17 weeks of the $600 federal unemployment benefit that expired in late July.

"As we grapple with the economic consequences of this pandemic, the bill I'm proposing would provide tax relief to unemployed Americans so they can spend their benefits to support their families and their communities," Durbin said in a statement.

Sens. Tammy Baldwin of Wisconsin; Debbie Stabenow of Michigan; Jack Reed of Rhode Island; and Mazie Hirono of Hawaii are cosponsoring the bill.

The federal government levies taxes on unemployment benefits comparable to ordinary income, and some states also expect those payments reported on state returns, according to Business Insider's Tanza Loudenback. The money is included in gross incomes and taxed at a person's normal income rate.

The IRS reminded people last month that states provide the option for people to withhold 10% of the payments so they can "cover part or all of their tax liability" next year. The process starts with a form that can be filed to state agencies distributing the benefits.

But it doesn't apply to Pandemic Unemployment Assistance, a special program Congress created to provide benefits to gig workers and contractors typically left out of state safety nets. Durbin's plan seeks to remedy that.

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Around 26 million people are still receiving unemployment benefits, per the latest Labor Department data. Congress is locked in a fierce debate over what amount should replace the lapsed $600 payouts.

In early August, President Donald Trump set up a "Lost Wages" aid program through an executive order, which provided $300 benefit payments to approved states.

Around $44 billion in disaster relief funding was pulled from the Federal Emergency Management Administration, which guaranteed six weeks of jobless aid through early September. But it's drying up.

Meanwhile, House Democrats unveiled a new $2.2 trillion stimulus package that includes restoring the $600 benefit payments through January 31.

It would be retroactive to September 5 if both chambers of Congress approve the package and Trump signs it into law. That prospect is still uncertain, though House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin are attempting to resolve the impasse between both parties.

Democrats and Republicans remain $1 trillion apart in their coronavirus relief proposals.