Login

Recent Tax Updates

SUBSCRIBE TO CROSSLINK UPDATES

Nontaxable Portion of Unemployment Compensation

Americans who received unemployment benefits last year (2020) can claim a special new tax break included in the $1.9 trillion American Rescue Plan Act enacted on March 11, 2021.

If your modified adjusted gross income (AGI) is less than $150,000 (regardless of filing status), the new law excludes from income up to $10,200 of unemployment compensation paid in 2020, which means you don’t have to pay tax on unemployment compensation of up to $10,200.

If you are married, each spouse receiving unemployment compensation doesn’t have to pay tax on unemployment compensation of up to $10,200. Amounts over $10,200 for each individual are still taxable. If your modified AGI is $150,000 or more, you cannot exclude any unemployment compensation. The exclusion should be reported separately from your unemployment compensation.

For those taxpayers that have not yet filed their 2020 tax return, our software has been updated to reflect the changes to the Form 1040, Schedule 1 – Additional Income and Adjustments to Income and you may file your 2020 tax return (software version 2021.25 required).

For those who received unemployment benefits last year and have already filed their 2020 tax return, the IRS emphasizes they should not file an amended return at this time, until the IRS issues additional guidance.

For more details see the following on the IRS website:

Mark Castro, CPA

Mark Castro, CPA

Mark has been with CrossLink Professional Tax Solutions (CPTS) since 2008, but has been in the tax industry since 1990. As the government/tax industry liaison for CPTS, Mark has been very active in working with the IRS, States, and other tax industry members to help improve communications, promote standardization, and simplification of eFile systems. Mark has also been active with industry associations as a board member of the National Association of Computerized Processors (NACTP) and the Council of Electronic Revenue Communication Advancement (CERCA) for many years. These two associations work with the IRS and States to help solve key eFile and electronic tax system issues and work to improve the operations of the State and IRS eFile systems.
Facebook
Twitter
LinkedIn
Email
Print

Recent Tax Updates