The American Rescue Plan, signed into law on March 11, 2021, includes a provision that makes the first $10,200 of unemployment nontaxable for each taxpayer who made less than $150,000 in 2020. If you are married, and your spouse also received unemployment, both of you can exclude $10,200.
The IRS has confirmed that taxpayers who qualify for the unemployment exclusion will not need to file an amended return. The IRS will calculate the exclusion and send the refund. Those refunds are due to begin processing the week of May 14, 2021. For more details, see the IRS press release.
The refund resulting from the unemployment exclusion will get sent to the bank account the IRS has on file. It will not go to the bank that handled the refund transfer.
Your refund will be mailed to the address the IRS has on file.
If you are due a refund after accounting for the unemployment exclusion, you don't need to pay any balance due shown on Notice CP 14. Most likely, your original return was processed and the notice was sent before your return was recalculated to include the exclusion. You should receive an additional notice from the IRS once your return has been recalculated to include the exclusion. You don't need to do anything once you receive this notice unless you disagree with the changes. In that case, you can call the IRS at the number on the top right corner of your notice.
TaxAct Federal editions have been updated to allow the unemployment exclusion. State programs will vary - see State Conformity below.
This federal exclusion will be adopted by some states, but not all. To determine if your state will allow the unemployment exclusion at the state level, see the list below.
Alabama does not tax unemployment, so no changes are necessary to the TaxAct program.
Alaska does not assess individual income tax.
Arizona will conform to the unemployment exclusion. The TaxAct Arizona program currently allows the unemployment exclusion. Qualifying taxpayers who filed an Arizona return before March 18, 2021 should file an amended return. For more information, see https://azdor.gov/news-events-notices/news/2020-amended-individual-income-return-notice.
Arkansas will not tax unemployment, so no changes are necessary to the TaxAct program. Qualifying taxpayers who filed before March 1, 2021 (the date the legislation passed) will not need to file an amended Arkansas return.
California does not tax unemployment. The TaxAct California program has been updated to addback the federal exclusion amount.
Colorado will not conform to the federal exclusion. The TaxAct Colorado program has been updated to addback the federal exclusion amount.
Connecticut will conform to the federal exclusion. The TaxAct Connecticut program currently allows the exclusion. Qualifying taxpayers who filed before March 25, 2021 will need to file an amended return
Delaware does not tax unemployment, so no changes are necessary to the TaxAct program.
The DC TaxAct program does not currently allow the unemployment exclusion. Qualifying taxpayers will need to file an amended return.
Georgia does not conform to the federal exclusion. The TaxAct Georgia program has been updated to addback the federal exclusion amount.
No official guidance provided yet, but legislation is pending. The Hawaii TaxAct program does not currently allow the unemployment exclusion.
Idaho does not currently conform to the federal unemployment compensation exclusion. The TaxAct Idaho program has been updated to addback the federal unemployment exclusion amount.
Illinois will conform to the federal exclusion. The Illinois TaxAct program currently allows the unemployment exclusion. Qualifying taxpayers who filed before March 18, 2021 do not need to file an amended Illinois return. Qualifying taxpayers who mailed a return by paper (or e-filed after March 14, 2021) will need to file an amended Illinois return.
Indiana does not conform to the federal exclusion. The TaxAct Indiana program has been updated to addback the federal exclusion amount. Taxpayers who received unemployment income in 2020 and have already filed their individual income tax return should not file an amended return at this time. DOR will be providing additional information.
Iowa will conform to the federal exclusion. The Iowa TaxAct program currently allows the exclusion. Qualifying taxpayers who filed before March 18, 2021 will not need to file an amended return.
Kansas will conform to the federal exclusion. The TaxAct Kansas program currently allows the exclusion. Qualifying taxpayers who filed before March 18, 2021 will need to file an amended return
No official guidance provided yet. The Kentucky TaxAct program does not currently allow the unemployment exclusion.
Louisiana will conform to the federal exclusion. The TaxAct Louisiana program currently allows the exclusion. Qualifying taxpayers who filed before March 24, 2021 will need to file an amended return.
Maine recently passed legislation to conform with the $10,200 unemployment compensation exclusion allowed on the Federal return. The Maine TaxAct program currently allows the exclusion. Qualifying taxpayers who filed before March 26, 2021 will need to file an amended return.
Maryland will allow the full federal unemployment exclusion as well as an additional unemployment exclusion from Maryland income for MD, PA, DC, VA, and WV unemployment income if it was included in FAGI as long as FAGI is not over $75,000/$100,000 (MFJ). You may need to amend your return if you file before Maryland changes are finalized in the TaxAct program in mid-April.
Massachusetts will mostly conform to the federal exclusion, but income thresholds will differ slightly. Taxpayers could qualify for the exclusion on the Federal return but not on the Massachusetts return. The Massachusetts TaxAct program currently allows the unemployment exclusion. Qualifying taxpayers should wait for further guidance from Massachusetts before filing an amended return.
Michigan will conform to the federal unemployment exclusion. The Michigan TaxAct program has been updated to allow the exclusion. Qualifying taxpayers who filed before March 25, 2021 should file an amended return. For more information, see Michigan Department of Treasury Notice Regarding the Treatment of Unemployment Compensation for Tax Year 2020.
Minnesota will conform to the federal unemployment exclusion. Minnesota will automatically amend qualifying returns and will send a notification describing what changes were made. You do not need to file an amended return unless Minnesota reaches out to you instructing you to do so.
Mississippi will not conform to the federal unemployment exclusion. The Mississippi TaxAct program does not currently allow the unemployment exclusion.
Missouri will conform to the federal exclusion. The Missouri TaxAct program currently allows the exclusion. Qualifying taxpayers who filed before March 18, 2021 will need to file an amended return.
Montana does not tax unemployment, so no changes are necessary to the TaxAct program.
Nebraska will conform to the federal exclusion. The Nebraska TaxAct program currently allows the exclusion.
New Hampshire does not tax unemployment, so no changes are necessary to the TaxAct program.
New Jersey does not tax unemployment, so no changes are necessary to the TaxAct program.
New Mexico will conform to the federal exclusion. The New Mexico TaxAct program currently allows the exclusion. Qualifying taxpayers who filed before March 18, 2021 will need to file an amended return.
New York does not currently conform to the federal exclusion. The New York TaxAct program has been updated to addback the federal exclusion amount.
North Carolina does not currently conform to the federal exclusion. The North Carolina TaxAct program has been updated to addback the federal exclusion amount.
North Dakota will conform to the federal exclusion. The North Dakota TaxAct program currently allows the exclusion. Qualifying taxpayers who filed before April 1, 2021 will not need to file an amended return.
At this time, no updates are needed to how your products are currently programmed for Ohio Individual Income Tax 2020. Ohio will notify all partners when the bill is signed or if there are any changes.
Oklahoma will conform to the federal exclusion. The Oklahoma TaxAct program currently allows the exclusion.
Oregon will conform to the federal unemployment exclusion. The Oregon TaxAct program currently allows the exclusion. Qualifying taxpayers who filed before March 18, 2021 will not need to file an amended return, as Oregon will make the necessary adjustments.
Pennsylvania does not tax unemployment, so no changes are necessary to the TaxAct program.
Rhode Island will not conform to the federal exclusion. The Rhode Island TaxAct program has been updated to addback the federal exclusion amount. Qualifying taxpayers who filed before March 30, 2021 will need to file an amended return.
South Carolina will conform to the federal exclusion. The South Carolina TaxAct program allows the unemployment exclusion. Qualifying taxpayers who filed before May 27, 2021 will need to file an amended return.
Tennessee does not tax unemployment, so no changes are necessary to the TaxAct program.
Utah will conform to the federal exclusion. The Utah TaxAct program currently allows the exclusion. Taxpayers who are eligible to exclude unemployment income and filed before the exclusion went into effect should file an amended TC-40 to claim the benefit using amendment code 6.
No official guidance provided yet. The Vermont TaxAct program currently allows the unemployment exclusion.
Virginia does not tax unemployment, so no changes are necessary to the TaxAct program.
West Virginia will conform to the federal exclusion. The West Virginia TaxAct program allows the exclusion. Qualifying taxpayers who filed before March 18, 2021 will need to file an amended return.
Wisconsin will not conform to the federal unemployment exclusion. The Wisconsin TaxAct program has been updated to addback the federal exclusion amount.