Taxation of Unemployement

June 02, 2021

The Utah State Tax Commission has issued a press release regarding the taxation of unemployment benefits. We have not received a commitment from the Internal Revenue Service to timely share changes to returns, excluding $10,200 of employment benefits from federal adjusted gross income. In the meantime, we have been receiving a number of calls from taxpayers asking us if they can file amended returns to claim the benefits of changes in the law.

This FAQ provides guidance to taxpayers


For Immediate Release
June 2, 2021

Update on Taxability of Unemployment Compensation

Salt Lake City, Utah – The Utah State Tax Commission will now allow an amended 2020 Tax Return to be filed to exclude, from the federal adjusted gross income, unemployment compensation of up to $10,200.

Treatment of Unemployment Compensation

The American Rescue Plan Act of 2021 allows an exclusion of unemployment compensation of up to $10,200 for individuals for taxable year 2020. In the case of married individuals filing a joint Form 1040 or 1040-SR, this exclusion is up to $10,200 per spouse.

To determine if you qualify for this exclusion, see the adjusted gross income (AGI) and filing status requirements below:

 

Filing Status                    AGI                                   Unemployment Compensation Exclusion

Single                                less than $150,000           up to $10,200

Qualified Widow(er)          less than $150,000           up to $10,200             

Head of Household           less than $150,000           up to $10,200

Married Filing separate    less than $150,000            up to $10,200

Married Filing Joint           less than $150,000           up to $20,400 ($10,200 per spouse)

                                         does not double     

 

Any unemployment compensation in excess of $10,200 ($10,200 per spouse if married filing jointly) should still be included on the tax return in adjusted gross income.

Did you already file a tax return?

If you already filed a tax return that includes the full amount of your unemployment compensation, and are waiting for the IRS is automatically correct the federal return, you can still file a Utah amended return. You will need to figure out your correct AGI (adjusted gross income), taking into account the unemployment compensation exempt from federal income tax, in order to correctly calculate the tax on your amended Utah return. Please file a paper form TC-40 and use the amended code 06. See tax.utah.gov for the latest changes to filing requirements.

Utah will refund any overpayment or apply it to other outstanding taxes owed. Refunds may take 2-3 months to process.