Unemployment compensation, benefits or income is considered taxable income, even if it is authorized under the Coronavirus Aid, Relief and Economic Security Act (CARES), and thus needs to be reported on your tax return.
As an unemployment benefit recipient, you will receive Form 1099-G, Government Payments, from you state tax agency by January 31, 2022, either by mail or electronically. If you did not receive the 1099-G from your state, please contact them or the state unemployment compensation website for this form.
Form 1099-G reports the amount of unemployment compensation received in Box 1 and any federal income tax withheld in Box 4. Be sure to include these amounts on your tax return on eFile.com - see instructions below.
On your eFile account, you will be walked on all your various types of income. Under Federal Taxes > Income, you will be able to report your 1099-G under the Other section towards the bottom of the page. Alternatively, you can add is manually by searching for the form.
Step 1: Sign in your eFile.com account
Step 2: Follow these steps for how to add form 1099-G.
On the form page enter or search for 1099-G and click Add Form.
Adjust Gross Income Note: When entering your Adjusted Gross Income during the eFile checkout process, you will want to enter your original AGI if your return was adjusted last year as part of the Unemployment Compensation Exclusion (UCE). You will want to take this figure from your originally accepted Form 1040, not the adjusted AGI after the UCE adjustment.
The Following Information is for 2020 Returns Only
There have been some income tax adjustments due to the American Rescue Plan or Stimulus three legislation as of March 12, 2021 and they are outlined below.
- If you eFiled your 2020 return on or before March 15, 2021 and reported unemployment income, and you want to adjust your income tax return based on the American Rescue plan as of March 12, 2021, you do not have to do anything. The IRS has confirmed that they will issue refunds for taxpayers who reported all of their unemployment income as taxable income. On March 31, 2021 the IRS announced the money will be automatically refunded during the spring and summer of 2021 to taxpayers who filed their tax return reporting unemployment compensation on or before March 15, 2021. Information about a payment status or lookup tool has not been provided.
- If you eFiled on or after March 16, 2021 and reported unemployment income, the eFile tax app will have calculated all necessary adjustments; you do not have to do anything else. More details below.
- When can you expect payment of the plus-up or unemployment refund increase if you filed before March 14, 2021: https://www.efile.com/tax-service/pdf/0616.pdf
If you reported unemployment income and you e-Filed before March 16, 2021 and your return got accepted by the IRS and you want to adjust the incomes tax for unemployment benefits due to the Stimulus 3 legislation, do NOT file a tax amendment. The IRS should issue you an additional refund. Only file an amendment if you were newly eligible for tax credits as part of the change.
If you reported unemployment income and you e-Filed on or after March 16, 2021, the eFile.com tax app would have made this adjustment and added the Unemployment Compensation Exclusion Worksheet - see below - as part of your tax return:
Find more information on unemployment benefits.