U.S. New Exclusion of up to $10,200 of Unemployment Benefits
U.S. New Exclusion of up to $10,200 of Unemployment Benefits
The Senate passed a version of the Covid bill that included a provision to waive taxes on the first $10,200 in unemployment insurance benefits for those who made less than $150,000 in adjusted gross income in 2020. If you received unemployment benefits in 2020, here is what you need to know about filing your return.
According to the latest version of the bill, for single taxpayer who made less than $150,000 in adjusted gross income in 2020, the first $10,200 in unemployment insurance benefits are tax free.
If both individuals in a married couple who file taxes jointly received unemployment insurance benefits in 2020, each will see taxes waived on the first $10,200 of that income ?for a total of $20,400 ?as long as their adjusted gross income is less than $150,000.
Taxpayers who had more than $10,200 in unemployment income in 2020 will still be taxed on the remainder. If your modified AGI is $150,000 or more, you cannot exclude any unemployment compensation.
You should receive a Form 1099-G showing the total unemployment compensation paid to you in 2020. Under the new exemption, you should report the total amount of unemployment compensation you received on line 7 of Schedule 1. Then, use the Unemployment Compensation Exclusion Worksheet to determine the exclusion amount you are eligible for, which you’ll report on line 8 of Schedule 1. If you file using a tax software, you may still need to wait for guidance to be implemented in the programs before filing.
If you collected unemployment insurance in 2020 but you already filed your tax return, you are still eligible for the exemption under the American Rescue Plan. However, the IRS has not issued guidance for those claiming the exemption after filing. The IRS strongly urges those who already filed to wait for more guidance before amending an existing return.
Reference:
https://www.cnbc.com/2021/03/09/covid-bill-waives-taxes-on-20400-of-unemployment-pay-for-couples.html
https://www.irs.gov/faqs/irs-procedures/forms-publications/new-exclusion-of-up-to-10200-of-unemployment-compensation
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