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Business Tax

Unemployment Benefit Recipients: Don’t File Amended 2020 Return Yet.

Thomson Reuters Tax & Accounting  

Thomson Reuters Tax & Accounting  

In a posting to its website, IRS asked individuals who received unemployment benefits in 2020 and have already filed their 2020 tax return, not to file an amended return until IRS issues additional guidance. It has also provided information for individuals who received unemployment benefits in 2020 but have not already filed their 2020 tax return.

Background.

The American Rescue Plan Act of 2021 (ARPA), which was signed into law on March 11, provides that, for taxpayers whose 2020 modified adjusted gross income is less than $150,000, the first $10,200 of unemployment compensation received in 2020 is not included in the taxpayer’s 2020 gross income. In the case of a joint return, the first $10,200 per spouse is not included in gross income. (Code Sec. 85(c)(1), as amended by ARPA Sec. 9042(a)) For additional information about this provision, see Individual provisions of the ARPA COVID-19 relief bill.

IRS guidance.

IRS has announced that it will provide taxpayers with additional guidance on those provisions that could affect their 2020 tax return, including the retroactive provision that makes the first $10,200 of 2020 unemployment benefits nontaxable.

For those who haven’t filed yet, IRS will provide a worksheet for paper filers and work with software industry to update current tax software so that taxpayers can determine how to report their unemployment income on their 2020 tax return.

And, IRS says, those who received unemployment benefits last year and have already filed their 2020 tax return should not file an amended return until IRS issues additional guidance.

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