One of the many tax benefits of the The recently passed American Rescue Plan Act of 2021 is the exclusion of up $10,200 of your unemployment benefits from income. This is great news for many of our citizens who suffered greatly from being unemployed as a result of the COVID-19 pandemic. So, the questions is how do I take advantage of this benefit?

For those who have not filed their returns for 2020., the exclusion will be calculated as a component of your tax filing. Major preparation services have this update in their software so all you have to do is input the numbers from your 1099-G and you are good to go. If you are paper filing….Stop!

For those who have already filed their returns for 2020 before the passing of ARPA, the IRS is re-calculating your tax return and sending you a refund based on the $10,200 exclusion. You don’t have to do anything except wait for a check. We do not know the IRS processing times, but you should give it at least 8 weeks to process. Do not file an Amended Return (1040X) trying to recover these funds. This could delay the adjustment.

This change does not necessarily affect your state filing. States have different rules when it comes to taxing unemployment benefits so check with your tax professionals for details about your particular state.

As with everything IRS, be flexible and patient!

Curtis Elliott, AFSP
Statewide Tax Services, Inc.