Minnesota guidance on federal unemployment compensation exclusion
03/25/2021
The American Rescue Plan Act of 2021 allows taxpayers with adjusted gross income of less than $150,000 to exclude from gross income up to $10,200 ($10,200 for each spouse for those filing Married Filing Jointly) in unemployment compensation received in tax year 2020.
Because Minnesota does not conform to the American Rescue Plan Act, your clients must include any related federally excluded unemployment compensation in Minnesota adjusted gross income.
What if my client has not filed yet?
Wait until your software vendor updates the software you use. Then, file your client's tax returns by May 17, 2021.
To prepare the federal return, use guidance issued on the IRS website for the new exclusion of unemployment compensation.
To prepare the state return:
Go to line 7 of Schedule M1NC, Federal Adjustments. Include as a positive number the amount from federal Form 1040 Schedule 1, line 8, that pertains to unemployment compensation excluded from FAGI.
Line C on Form M1 should be the total amount of compensation your client received.
Do not use other lines of Schedule M1NC to file before your software updates. Doing this may result in processing delays.
Should I amend my client's federal tax return for this new tax law?
At this time, the IRS advises clients not to file amended returns related to the new legislative provisions. For details, see the IRS's statement.
What if I already amended my client's federal tax return?
You must notify the Minnesota Department of Revenue within six months of amending the federal return. For instructions on how to notify us, see Amending an Income Tax Return.
Questions?
Call us at 651‐296‐3781, or email individual.incometax@state.mn.us.