The American Rescue Plan Act of 2021 Nontaxable Unemployment Benefits
Wednesday, April 14, 2021
The federally enacted American Rescue Plan Act of 2021 includes a retroactive provision making the first $10,200 per taxpayer of 2020 unemployment benefits nontaxable for taxpayers with a modified federal Adjusted Gross Income (AGI) of less than $150,000 per return.
I have not yet filed my Federal or Oklahoma tax return:
Follow the IRS updated instructions for Schedule 1 to calculate your modified adjusted gross income and file your federal and Oklahoma return accordingly.
Under current law, taxpayers will not be required to add back any of the nontaxed unemployment benefits in computing their Oklahoma taxable income.
I have filed my federal return prior to the passage of the Act but have not filed my Oklahoma return
Follow the IRS updated instructions for Schedule 1 to calculate your modified federal adjusted gross income. If less than $150,000, please recompute your revised federal Adjusted Gross Income (AGI) with your federal unemployment exclusion and use that as the starting point for your 511.
You may use a pro forma* federal form 1040 or 1040-SR and Schedule 1 using the updated IRS instructions to calculate your revised adjusted gross income. Submit your 511 with your updated amounts.
I have filed both my federal and Oklahoma return:
If you filed your return before March 15, 2021, you do not need to do anything. The Oklahoma Tax Commission is planning to automatically update your Adjusted Gross Income (AGI) beginning next month. Once your return has been adjusted, you will receive a letter from the OTC explaining the update, and if you are entitled to a refund you can expect an automatic payment. If you disagree with the changes, you may respond to the letter.
Note: OTC anticipates return adjustments will eliminate the need to file an amended return. If you amend your return prior to OTC's AGI update, you may experience a delay in your adjustment and any payment you are entitled to receive as a result of the adjustment.
If you filed your return after March 15, 2021 and did not report the unemployment exclusion on your federal return, you will need to file an amended return using Form 511X and include an estimated federal Form 1040 and Schedule 1 showing the re-computation of your AGI. It is not necessary to file the estimated federal 1040 and Schedule 1 with the IRS.
Please see the IRS website for more information on how to properly exclude unemployment income and re-compute your AGI. If you file your amended return by paper, write "Unemployment Exclusion" across the top of Form 511X.
Note: Taxpayers who are expecting a refund will receive the refund through the originally selected preferred method of payment. Unexpected refunds without a selected preferred method of payment will be automatically placed on a Way2Go Debit Card. For questions regarding Way2Go Debit Cards, see frequently asked questions. After your Way2Go Debit Card has been received, please activate the card here.
For additional information, please review the IRS article: New Exclusion of up to $10,200 of Unemployment Compensation.