NYS To Opt Out Of Unemployment Exclusion

In late March, the State of New York extended the tax filing deadline to May 17, 2021 to match the Federal extension. At the same time, while the IRS excluded unemployment compensation from taxable income, New York State remained silent on the issue. With bills pending in the NYS Senate and Assembly, it was hoped that NYS would conform to the federal exclusion. Many income tax returns were filed with the exclusion.

The New York State Tax Department has recently stated that unemployment compensation excluded from Federal income tax under the American Rescue Plan Act of 2021 is NYS taxable income. The federally excluded amount (a maximum of $10,200) must be added back on the NYS personal income tax returns on newly amended forms.

Those whose 2020 Income Tax Returns have already been filed using forms that existed at the time, might receive an adjustment from NYS reflecting the amount of unemployment and the appropriate tax. This can of course, affect your refund, and/or taxes due to New York State. If you do receive a notice, speak with your tax professional who can best advise you on the way to proceed.

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