As many of you know, I practice as a tax accountant as well as an elder law and estate planning attorney. This blog is an example of the interdisciplinary nature of my practice.
On March 11, 2021, President Biden enacted the American Rescue Plan (“ARP”). Oddly, certain provisions of the ARP relate back to 2020 and may have an impact on your 2020 income tax return. Under the ARP, the first $10,200 of unemployment compensation, received in 2020, is tax-free so long as your 2020 adjusted gross income is less than $150,000. If you are married, both you and your spouse may each exclude $10,200.00.
Seeing that two-thirds of the tax filing season has elapsed, this relief creates somewhat of a tax filing headache for those of you who have already filed your 2020 tax returns. Unfortunately, you will need to amend your 2020 tax returns to obtain this benefit. If you are in the process of preparing your 2020 tax returns with an accountant, you should remind your accountant that you have unemployment compensation since this is crunch time for accountants and many may be unaware of this retroactive law.