Unemployment during COVID

[Yardley CPA]

Just making sure I am not missing anything.  Single client was laid off during 2020 as a result of COVID.  She filed for and received unemployment benefits during the year and received a 1099-G.  These are not additional unemployment benefits, they are just her initial, normal unemployment benefits.  From a federal perspective, those benefits are considered taxable income, correct? 

[Possi]

As far as I know, all unemployment benefits are taxable to the feds, normal and "additional." 

[Yardley CPA]

4 minutes ago, Possi said:

As far as I know, all unemployment benefits are taxable to the feds, normal and "additional." 

Thank you, Possi...that's my understanding as well but wanted to make sure I am not missing something. 

 

[Lion EA]

Not until/unless Congress votes...

[Gail in Virginia]

There is a bill in committee that would make the first $10,200 of unemployment for 2020 not taxable.  It is not law.  IMO, it should have been passed last year or fuhgeddaboutit.  But that doesn't seem to be the way some congress-vermin roll.

[Abby Normal]

MD just passed a law last week making unemployment not taxable for singles with federal AGI less than 75k (100k joint) and MD hasn't even released the new forms yet. Who knows how long ATX will take implementing the new forms.

[Abby Normal]

From a reply to an email I sent to MD tax pro help:

Currently the form 502LU is being developed and will be completed within 2 to 3 weeks.  At that time paper returns should be filed to include the 502LU deductions along with the 502LU form.  If a return has already been submitted which included the unemployment as being taxable you should file an amended return.  You will need the form 502LU which is still being developed.  Taxpayers will be given credit for any withholding on line 40 of the form 502. 

So MD returns with unemployment will need to be paper filed. It sounds like MD doesn't expect to reprogram their computers for this new and temporary form.

[jklcpa]

For any here filing DE returns - DE Div of Unemployment sent a second page with the 1099G stating that legislation was in the works to make unemployment N/T for 2020 DE purposes and to watch the DDOR website for updated guidance.

I actually had to check the status of the state's legislation and saw that the bill was signed on 2/8, and Drake issued an update for the change on 2/13.  Still no official pronouncement on DDOR website though.  Its latest news update was on 1/27 about the 2/12 delayed start date for this filing season. 

[Yardley CPA]

Should these legislations become law (sounds like it already is in Maryland) we would file an amended return for any filed before the official proclamation?

[Abby Normal]

2 hours ago, Yardley CPA said:

Should these legislations become law (sounds like it already is in Maryland) we would file an amended return for any filed before the official proclamation?

Yes.

[GLJEANNE]

Unless the state Revenue department decides to automatically adjust them.  My state is infamous for doing the conforming to federal late - like April or May, some years.  So the Revenue dept, if it's something simple - like this would be - frequently tells us not to bother amending, they'll issue all the extra refunds after tax season.

[Pacun]

This document doesn't mention paper filing. If every person with covid relief on MD has to paper file, they will have about 40% of the MD population filing by mail.

Also, it says that whoever filed doesn't need to amend. 

I believe form 502LU is not available yet.

https://www.marylandtaxes.gov/RELIEFAct/docs/2.16.21-748am-RELIEF-Act-Tax-Alert.pdf