Filing 2020 Unemployment Compensation
The American Rescue Plan signed on March 11, 2021, allowed taxpayers to exclude up to $10,200 for individuals and $20,400 for married filing jointly for 2020 unemployment compensation. Since this plan was put into place after the tax season had already started, the IRS has released additional guidance on how to include this exclusion on your tax return and how they will handle refunds for those who have already filed with unemployment.
If You’ve Already Filed
Most taxpayers who filed prior to this exclusion and claimed the full amount of unemployment do not need to take further action. The IRS will automatically correct the taxable amount of income for unemployment. Any overpayment of tax will result in a refund or be applied to outstanding taxes owed.
If you claimed the earned income tax credit, premium tax credit, or recovery rebate credit, the IRS will also be making corrections to these credits. However, if the exclusion makes you newly eligible for a credit that you didn’t claim on your tax return, you will need to amend your return to claim that credit.
If You Haven’t File Yet
The IRS has updated its forms to include this exclusion. If you are filing on your own this year, you can find instructions on how to report unemployment compensation here.
If you need help filing your tax return this year, we can help! We offer in-office, drop off, and online services so you can file when and where you want. We also have discounts and coupons available so you can save on tax prep fees. Give us a call at (360) 922-0235 to get started.
Disclaimer: This material is prepared for informational purposes only, and is not tax advice. Please speak with a tax professional or visit the additional resources below to see how this information may apply to you.
