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How to Report Unemployment Income

Question:
How to report unemployment income on your tax return
Article, Solution:

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. However 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 in Step 3.

Attention:

  • 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 calculate all necessary adjustments; you do not have to do anything else. More details below.

As an Unemployment benefit recipient you will receive Form 1099-G, Government Payments, from your state tax agency by January 31 - in the subsequent year of the tax return year -  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.

Attention: 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 

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.

Step 1: Sign in your eFile.com account

Step 2:  Follow these steps for how to add form 1099-G. https://www.efile.com/kb/ef0032/

On the form page enter or search for 1099-G and click Add Form

Step 3, Option 1: 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, however do NOT file a tax amendment at this point. We will update this page with more information about this as it becomes available. 

Step 3, Option 2: If you reported unemployment income and you e-Filed on or after March 16, 2021, the eFile.com tax app will adjust your income tax for the reported unemployment income you entered. You do not have to take additional steps. The tax app will generate the Unemployment Compensation Exclusion Worksheet - see below -  as part of your tax return:

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