This article contains information current as of March 25, 2021. The IRS has announced that returns filed previous to the unemployment compensation exclusion should NOT BE AMENDED:
"If you have already filed your 2020 Form 1040 or 1040-SR, you should not file an amended return at this time. The IRS will issue additional guidance as soon as possible."
View the updated IRS article about the new exclusion of up to $10,200.
The American Rescue Plan Act of 2021 excludes from income the first $10,200 in unemployment compensation received in 2020 per taxpayer on their 2020 tax return. The new provision applies to taxpayers with an AGI of less than $150,000. The IRS has recently released a new unemployment compensation exclusion worksheet and updated instructions on how to file 2020 tax returns that contain unemployment income.
Since income in a community property state is considered to belong to both husband and wife, and is divided evenly between both taxpayers, the 2020 Unemployment Exclusion of $10,200 is applied for each taxpayer to all unemployment compensation received yielding a total exclusion of up to $20,400. Refer to the IRS release: IRS: Unemployment Exclusion Update for Married Taxpayers Living in a Community Property State
TaxSlayer Pro automatically calculates the exclusion based on the AGI entered in the return and generates the Unemployment Compensation Exclusion Worksheet. The exclusion amount calculated on the worksheet in turn flows back to Schedule 1 (Form 1040) line 8. UCE will print on the line next to line 8, identifying the amount as the unemployment compensation exclusion.
Returns filed prior to the release of the federal update in TaxSlayer Pro will automatically re-calculate to exclude the non-taxable portion of unemployment income.
