Yes, all unemployment compensation received as a result of COVID-19 must be reported on your tax return. Your unemployment compensation received after tax year 2020 will be fully taxed by the federal government.
For tax year 2020:
The first $10,200 of unemployment income can be excluded from your federal income. If married filing jointly and both spouses received unemployment, the amount increases to $20,400. The AGI must be less than $150,000 for both single and joint filers.
If the taxpayer has already filed for 2020, they will be affected. At this time, the IRS is still determining how the adjustment will be handled. The IRS does not expect returns that have already been filed to be paused or interrupted by this change.
How do I report this on the return?
Any unemployment income you received during 2020, even if you lost your job because of coronavirus (COVID-19) related closures, will need to be reported as taxable income on your return.
You should still receive a 1099-G with Box 1 income to report your 2020 unemployment benefits. Please report these unemployment benefits under:
- Federal Section
- Form 1099-G Box 1