Many taxpayers received unemployment compensation during 2020 due to layoffs and furloughs caused by the Coronavirus Pandemic. If you are one of those taxpayers and your modified adjusted gross income (AGI) is less than $150,000, the American Rescue Plan enacted on March 11, 2021, excludes from income up to $10,200 of unemployment compensation. For married couples, each spouse receiving unemployment compensation will be allowed to exclude up to $10,200 each . Amounts in excess of the $10,200 will be treated as taxable income. If your modified AGI is $150,000 or more, no exclusion will be allowed and the entire unemployment compensation will be taxable.
For those who have already filed for 2020, the IRS has advised that taxpayers should not file amended tax returns. The IRS will refigure the taxes using the excluded unemployment compensation amount and will adjust taxpayer’s account accordingly and will send any refund amount directly to the taxpayers.
As we await further guidance and more details, please do not hesitate to contact your C&J engagement team with any immediate questions.