Iowa just passed a law [update: it was passed, but remains unsigned by the governor as of March 17] making the first $10,200 of unemployment income received in 2020 non-taxable on Iowa tax returns. This is great news for anyone who collected unemployment in Iowa last year. Additionally, Congress has now passed the American Rescue Plan, a huge pandemic relief bill that will (among other things) make that first $10,200 in unemployment income non-taxable on federal tax returns. This would be good news for everyone who collected unemployment benefits in any state.
The less-great news is that these laws change the taxability of income that in many cases has already been reported to tax preparers. In our case, we’ve completed and filed some returns that will probably need to be amended to account for the changes.
- If you’re a client who had unemployment income in 2020 and has already filed, rest assured that you’re on our list of folks to whom we’ll reach out after tax season to discuss this situation and determine whether it will be beneficial to amend your 2020 returns.
- If you’re a client who hasn’t filed yet or hasn’t even heard from us about your returns, all we can say is: please be patient. When Carrie reaches your file in her queue, if she finds that you or your spouse had unemployment income, we’ll set your file aside until the law has passed, the IRS has issued guidance on the new law, and our software has been updated to account for the changes. Once that happens, she’ll work on the returns that were set aside and we’ll be back to our normal process.
“Please be patient” is our mantra around here this tax season. IRS delayed the start date of the filing season, and the tax laws and forms keep changing while we’re trying to prepare and file returns. It’s certainly a challenge. Keep in mind that we will prepare and file as many tax returns as we can by the April 15th deadline, but if yours isn’t one of them, don’t worry. We will file extensions for all returns that aren’t filed on time and can help you determine whether an extension payment is needed.
For more about extensions and how they work, please read this.