The American Rescue Plan Act of 2021 includes a retroactive provision that makes the first $10,200 of 2020 unemployment benefits nontaxable. Unemployment compensation is reported on Form 1099-G Certain Government Payments.

For those of you who have already filed your tax return containing unemployment compensation for tax year 2020, the IRS emphasizes that you should not file an amended return. As noted within the guidance, if a 2020 Form 1040 or 1040-SR return has already been filed, there is no need to file an amended return to figure the amount of unemployment compensation to exclude. The IRS will refigure the taxes using the excluded unemployment compensation amount and adjust the tax account accordingly. The IRS will send any refund amount directly to the taxpayer.

If you haven’t filed and received unemployment compensation during tax year 2020, the IRS is working with the tax software industry to update current software for the retroactive provision. Check with your tax return preparer to determine the best time to file.