TurboTax has been updated for the Unemployment Exclusion.
Unemployment benefits are reported as income on Form 1040, Schedule 1, Line 7. Form 1040, Schedule 1, Line 8 is captioned as “Other income.” The exclusion is computed on a new worksheet, the Unemployment Compensation Exclusion Worksheet. Line 3 of that worksheet is Schedule 1, Line 8 before considering the exclusion.
Here is what you need to know:
The bill makes the first $10,200 of federal unemployment income ($20,400 for married filing jointly) tax-free for households with income less than $150,000. The legislation excludes only 2020 federal unemployment benefits from taxes, not unemployment income received in 2021.
- If you have not filed your 2020 tax return, yet, TurboTax is up to date with the new law and will guide you on how to claim these additional unemployment benefits on your tax return.
- If you already filed your 2020 tax return, you do not need to do anything to get these additional unemployment benefits. The IRS announced that they will automatically adjust your return and send any additional refund amount directly to you. However, some people may now be newly eligible for additional deductions and credits not already included on the original tax return. In these cases, you will likely want to amend your return to claim these additional dollars. Additional information on this is below.
When will I get my additional unemployment refund from the IRS?
According to the IRS, they will send payments in two phases:
- Phase 1: The IRS will adjust returns for taxpayers eligible for up to $10,200 exclusion. Payments for phase 1 are expected to start in May.
- Phase 2: The IRS will adjust returns for those married filing jointly taxpayers who are eligible for the up to $20,400 exclusion and others with more complex returns. No specific timing has been given for phase 2 payments.
