On March 11, 2021, the American Rescue Plan Act was signed into law by President Biden. The Act includes a retroactive provision that makes the first $10,200 of 2020 unemployment benefits nontaxable for taxpayers having a modified adjusted gross income (AGI) of less than $150,000. For married couples, each spouse receiving unemployment can exclude up to $10,200. This provision is intended to provide relief to millions of taxpayers who lost their jobs during the pandemic in 2020. Note: For federal taxpayers who have already filed their 2020 return, the IRS is strongly urging that they do not file an amended return until additional guidance is issued.
In Massachusetts, the Department of Revenue (DOR) provides that unemployment is generally taxable income and that taxpayers who received a Form-1099G, which shows the amount of unemployment benefits or pandemic unemployment benefits received, must report this income on their return. The DOR adds that pending legislation could impact how much of the unemployment benefits received is taxable and cautions taxpayers that the Massachusetts taxable amount may differ from the taxable amount for your federal return.
We are monitoring the status of this pending legislation.
Please contact our office for more information.