Amending 2020 Tax Return with Unemployment Compensation

Now that President Biden has signed into law the "American Rescue Plan", there are a number of benefits that individuals should take note of such as the next round of stimulus payments and extended unemployment benefits.  One aspect that has not been discussed much is that for individuals who received unemployment compensation in 2020. The first $10,200 per person will not be taxed if the household makes under $150,000.  For married couples filing jointly, this means that the first $20,400 will be tax-free and could result in tax savings of over $1,000.

If you haven't filed your income tax return yet and believe you may qualify for this tax break, it is best to wait until directions have been more clearly defined from the IRS so you can receive this tax reduction. It could take a few weeks for the IRS to provide guidance on how to implement this tax law change in the middle of the tax season but your patience may pay off.  It may also impact your state income taxes as each state treats income differently than the IRS, but it may allow the tax break to benefit your state return as well.

Individuals who have already filed their 2020 income tax returns and did not take this benefit will want to review their situation to see if filing an amended return will allow them to receive this tax break.  If you believe you qualify, contact your tax preparer to ask how you may go about filing an amended return. Fortunately, the IRS has now implemented the ability to e-file amended returns starting this year.  That will hopefully expedite the process for those who normally would have to file and mail in an amended return which could take months to process. 

If you have any questions about tax and estate planning, please feel free to contact Glick and Trostin, LLC at 312-346-8258.

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