For those of us who filed for Unemployment Benefits this year – and there were many of us, so don’t be shy, The American Recovery Plan (ARP) has addressed the added and unplanned for tax impact of those benefits.
The idea is simple enough – the first $10,200 of benefits are excluded from your taxable income (in other words – tax-free!) as long as your “Household Modified AGI” is below $150,000.
But as is typical of most things tax related, the devil is in the details. So here are the tricky bits:
1) Some people have already filed their returns for 2020 – some even paying extra tax amounts. Did we miss out?
2) How the heck are we to fit the exclusion into forms that aren’t set-up for the exclusion?
3) And for my State taxes?
…and the answers are:
#1 Nope. You just need to file an amended return (1040X) and get a refund (and don’t forget to recalculate the EITC too)
#2 Use line 8 on Schedule 1 in a modified way just approved by IRS guidance
#3 Each state is handling this differently. If you are in Colorado then either
a) if you have filed already – no change is needed
b) if you have NOT filed – you will need to add back the exclusion amount to your DR 0104 (unfortunately “Colorado’s income tax statutes do not incorporate retroactive federal statutory changes that are enacted after the last day of a taxable year.” but State leaders are pursuing other ways to reduce COVID related economic stresses.)
If we didn’t work together for your taxes this year, I am still available to help with this – but do try your preparer first as they have all your info already. If you used TurboTax or some other self-prep software – no judgement – you can file the amended return as part of this year’s subscription and I am available if needed.
Stand by for more elements of the ARP to come as I see folks needing help with tax implications of this legislation.
As always, have questions, give me a shout.
Be well and be safe.
~Barb
Quote take from CO Department of Revenue Press Release
Village Accounting, LLC 