TurboTax has incorporated the latest unemployment tax law changes into its software. These updates reflect the American Rescue Plan Act and other recent legislation, ensuring that users can file their taxes accurately and efficiently. Taxpayers can rest assured that TurboTax will guide them through the necessary steps to account for unemployment compensation received in 2020 and 2021. The software will automatically calculate any applicable tax exemptions or deductions, ensuring that users file their taxes correctly and minimize their tax liability.
Tax Law Updates
The American Rescue Plan Act of 2021 introduced significant changes to unemployment tax laws, which TurboTax has incorporated into its software. These updates include:
- Exclusion of unemployment benefits: Up to $10,200 of unemployment benefits received in 2020 are excluded from federal income tax for taxpayers with modified adjusted gross income (MAGI) below certain thresholds.
- Extended unemployment benefits: The law extended unemployment benefits by 11 weeks through September 6, 2021.
- Additional $300 weekly unemployment benefit: The law provided an additional $300 per week in unemployment benefits from March 14, 2021 through September 6, 2021.
TurboTax has implemented these changes, making it easy for taxpayers to accurately report their unemployment benefits and take advantage of the tax savings.
Eligibility for Unemployment Benefits Exclusion
To qualify for the exclusion of up to $10,200 of unemployment benefits, taxpayers must meet the following criteria:
- Filing status must be single, married filing jointly, or head of household.
- MAGI must be below the threshold for the filing status:
| Filing Status | MAGI Threshold |
|---|---|
| Single | $150,000 |
| Married filing jointly | $300,000 |
| Head of household | $150,000 |
TurboTax Updates
TurboTax is constantly updating its software to reflect the latest tax laws, including the new unemployment tax laws. These updates ensure that you can file your taxes accurately and on time. Here are some of the key updates that TurboTax has made:
- Added a new form to report unemployment compensation income.
- Updated the tax calculations to reflect the new unemployment tax rates.
- Provided guidance on how to claim the new unemployment tax credit.
In addition to these updates, TurboTax is also offering a number of resources to help you understand the new unemployment tax laws. These resources include:
- A comprehensive guide to the new unemployment tax laws
- A frequently asked questions section
- Live chat support
If you have any questions about the new unemployment tax laws, TurboTax is here to help. You can find more information on the TurboTax website or by contacting customer support.
Avoid Using the Phrase “Is Turbotax Updated With New Unemployment Tax Laws” as a Subtopic’s Title
When writing about TurboTax updates, it is important to avoid using the phrase “Is Turbotax Updated With New Unemployment Tax Laws” as a subtopic’s title. This phrase is not specific enough and does not provide any information about the content of the subtopic. Instead, use a more specific title that accurately reflects the content of the subtopic.
Unemployment Benefits and Tax Implications
The American Rescue Plan Act of 2021 (ARPA) made significant changes to the tax treatment of unemployment benefits. Previously, unemployment benefits were fully taxable at the federal level. However, ARPA provides a temporary exclusion for up to $10,200 of unemployment benefits received in 2020 for taxpayers with modified adjusted gross income (MAGI) below certain limits.
- Single: $150,000
- Married filing jointly: $300,000
- Head of household: $200,000
The exclusion is phased out for taxpayers with MAGIs above these limits. The exclusion does not apply to state income taxes, so taxpayers may still have to pay state taxes on their unemployment benefits.
| Filing Status | Income Limit for Full Exclusion | Phase-Out Begins at |
|---|---|---|
| Single | $150,000 | $150,000 |
| Married filing jointly | $300,000 | $300,000 |
| Head of household | $200,000 | $200,000 |
If you received unemployment benefits in 2020, you should have received a Form 1099-G from the state unemployment agency. This form will show the amount of unemployment benefits you received. You will need to report this income on your federal income tax return. If you qualify for the exclusion, you can use Form 1040 and the instructions to calculate the amount of your exclusion.
Filing Season Preparation
As a reminder, changes to the tax code are made each year which means tax software, like TurboTax, needs to update its software to keep up with tax code changes. In terms of the American Rescue Plan of 2021, the first $10,200 in unemployment compensation received in 2020 is non-taxable for taxpayers with adjusted gross incomes (AGIs) of less than $150,000. If your AGI was over $150,000, you must pay taxes on all your unemployment benefits.
Many taxpayers who received unemployment benefits in 2020 have already filed their 2020 tax returns.
If you have already filed your 2020 tax return and you are eligible for the tax break on unemployment compensation, you do not need to file an amended return. The IRS will automatically recalculate your tax refund based on the new tax law. Refunds are expected to start being sent out in May.
If you have not yet filed your 2020 tax return, be sure to use tax software that has been updated for the 2021 tax season. TurboTax has been updated and will calculate the correct amount of tax you owe based on the new law.
And that’s a wrap! I hope this quick update has helped put your mind at ease about the latest tax laws and TurboTax’s preparedness. Keep in mind that this information may change, so be sure to visit our site again soon for the most up-to-date news. Thanks for stopping by, and stay tuned for more tax-related insights and tips. Cheers!