On Thursday, March 11, the president signed the American Rescue Plan Act of 2021 (ARPA) into law. The new plan includes relief payments and tax provisions that will impact 2020 and 2021 returns.
For tax year 2020:
- The first $10,200 in unemployment benefits will be excluded form your taxable income.
- Married filing Joint filers who both had unemployment income can both qualify for the exclusion.
- This applies to taxpayers with AGI of less than $150,000.
For taxpayers that have already filed their returns before the exclusion was implemented, the IRS asks you do not amend the return. The IRS will determine the correct taxable amount of unemployment compensation and tax. Any resulting overpayment of tax will be either refunded or applied to other outstanding taxes owed.