2021 Unemployment Exclusion - YouTube

- Hey guys, it's Wayne with W Scully CPA PC,

fixing America's tax problems everyday all day.

Now, I recently, as you all know,

the America rescue plan act was enacted

by President Biden, or signed by President Biden

on the 12th of March and included in that package,

or that plan, is relief for folks

who got unemployment insurance benefits.

And I mean, this is huge, right?

I mean, unemployment benefits are normally taxable.

I mean, just off the bat, but in this case

they're giving some relief to folks who receive that

and it makes sense.

You know, people are hard hit by the pandemic

and with all this happening, I mean,

they need, just need a break.

So getting $10,200 of your unemployment benefits

exempted or excluded from federal income tax.

Okay?

So if your modified adjusted gross income was $150,000

or less than $150,000, you basically get to exclude

up to $10,200 of unemployment compensation.

Now, if you're married, you're so keen

what happens then?

Well, each spouse gets to exclude up to $10,200

off unemployment compensation, right?

$10,200 off unemployment compensation gets excluded.

All right?

And like I said, as long as

your modified adjusted gross income,

and I won't go into the technicalities of what MAGI

or modified adjusted gross income is.

But you just need to know

if you're way below that threshold

which I would imagine most people getting unemployment

during that period, probably, you know,

low-income earners or, you know,

not past $150,000 threshold, but anyway.

You and your accountant, whoever is gonna work

on that tax return for you will figure that out, okay?

So the exclusion should be reported separately

for your unemployment compensation.

That's one thing you need to know.

And there's some instructions, there updated instructions

for schedule one line seven of the tax return 1040

that's gonna basically walk you through

how to calculate your exclusion.

Okay? So that's important.

As usually you get a form 1099G

from your state where they report the amount

that you received for unemployment benefits

cause the state controls that.

And of course, as you know

there was a federal supplement for the uninsurance benefits

during the pandemic, or still ongoing.

They've actually extended that too.

That's now $300 per week I think is the max

on the federal site.

Anyway, so as I said before, for married people

you're supposed to exclude to married taxpayers,

you're supposed to exclude up to 10,200

of unemployment compensation.

And so, for example

if you got paid $20,000 on unemployment compensation,

and your spouse receive $5,000

on unemployment compensation,

then on line seven of that schedule one,

you're gonna report 15,200, that's 10,200 for you,

and 5,000 for your spouse.

Okay?

So you can like combine entire thing, make it 20,400

and just exclude entire, no,

it's 10,000 per person, so that's the max, alright?

So if you made 20,000, she made five,

the most you can exclude is 15,200.

Okay? All right.

And again, modified adjusted gross income is huge

if it's more than $150,000 or more,

then you don't get to exclude unemployment.

Okay?

And there's some worksheet that the IRS has created,

or that exists that you can use

to calculate the exclusion amount.

But we won't get into that here obviously

cause that's gonna be just a bit too much.

And so if you received an overpayment

of unemployment compensation in 2020,

you need to, and you repeated in 2020,

obviously you need to back that out,

you need to subtract that

from the totals on the 1099-G.

Cause you may never be reflected there.

Okay?

Cause otherwise you're gonna be

shooting yourself in the foot.

All right? So you wanna back that out,

make sure it's, you know, correct,

make sure it's accurate.

And it's actually what you received

and not received net, all right?

Or whatever you paid back.

So you wanna make sure you do that correctly.

And then, you know, as you know that most States,

they used to mail those 1099-G forms

but now they send them electronically.

So just make sure you check with your state

volunteer department of labor website and get that 1099-G

so you can properly take your exclusion, this $10,200.

So I'm not sure why they made it $10,200,

not an even 10,000 or 11,000, but anyway, I'll take it.

I'm sure the folks out there

who are really hurting will take that too.

So that's good.

So, I guess before check your state's website

and make sure you have that 1099-G

so you can report accordingly.

All right, well that's it for me for today

and if you have any other questions about anything else

or this issue, feel free to call your tax advisor.

And if you have none, give me a call.

Okay, my name is Wayne and I'm with the firm

W Scully CPA PC focused on fixing America's tax problems

or firms specialize in tax resolution matters,

and we serve clients virtually.

Make an appointment by visiting www.wscullycpa.com,

that's www.wscullycpa.com,

or you can call (855) 254-1892,

that's (855) 254-1892.

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Thanks guys.

I'll chat to you next time.

Bye.