On March 10, 2021, the U.S. House of Representatives passed a new stimulus bill of $1.9 trillion for COVID relief. Among many other provisions is a special rule regarding the suspension of tax on a portion of unemployment compensation. For any taxable year beginning in 2020 where a household has an adjusted gross income (AGI) that is less than $150,000 (excluding unemployment compensation), the first $10,200 of the taxpayer’s unemployment compensation will be nontaxable. It is important to note that the limits for both AGI and nontaxable unemployment compensation apply to the household in its entirety, the provision does not differentiate between Single and MFJ filing statuses.
For those taxpayers who have already filed their 2020 taxes, there is no further explanation at this time regarding the steps to take to receive your benefits from this provision. For those taxpayers who have not filed their 2020 taxes, we are still waiting for more information on how this will need to be reported on your tax return. As a result, we recommend delaying your tax filing until we receive more guidance.
Please contact your WG tax advisor for additional information regarding the suspension of tax on a portion of your unemployment compensation.