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What happens if I forgot to file unemployment benefits in 2021?

You may not be aware that you need to report any income received from state unemployment benefits on your tax return. Here’s what to do if you forgot.

You may not be aware that you need to report any income received from state unemployment benefits on your tax return. Here’s what to do if you forgot.

The past year has been very stressful with the challenges and changes in our lives brought about by the covid-19 pandemic and many found themselves laid off and collecting unemployment for the first time. Although not every state taxes unemployment benefits, the federal government does which means it needs to be reported on tax returns.

Normally when a person starts a job, they chose how much they want their employer to take out of their check to go toward income tax, but this can be overlooked when people file an unemployment claim, leading to an unpleasant surprise come tax season. Democrats in Congress gave those who claimed jobless aid in 2020 a breather in the form a waiver on the first $10,200 received in unemployment compensation. However, what should you do if you forgot to file the money you received in unemployment benefits?

Unemployment compensation records

Unemployment benefits are paid out by the state where you file your claim. This includes money that was paid out through the federal pandemic unemployment compensation programs. The state employment agency is required to send you a Form 1099-G so that you have a record of the money that you received in unemployment benefits. These payments will be on file with the IRS as well.

However papers can get lost or misplaced, in this case you will need to contact your state employment agency to request your payment history. You can find the contact information for your state's unemployment office on the Department of Labor Online Portal.

Should I amend my tax return to file my unemployment benefits?

The IRS pushed back the deadline for filing taxes again this year due to complications from the covid-19 pandemic for taxpayers and the agency. As well because of the extra work that has been placed on the agency implementing the numerous new tax provisions established in the American Rescue Plan, including sending out the $1,400 stimulus checks. Filers now have until 17 May to file their federal taxes but you should check with your state tax agency to see if it has followed suit.

If you realize that you will owe the IRS money and have failed to file your income from jobless aid before the IRS contacts you, then you should file an amended tax return on Form 1040X (Amended US Individual Tax Return). You will need to include a copy of your 1099-G with the amended return and include a payment for any tax you now owe to avoid any penalties. Fortunately, the IRS has made it a little easier, taxpayers can now file an amended return electronically.

Don't forget about the $10,200 tax break on unemployment benefits

However, when doing your calculations keep in mind that there is now a waiver on the first $10,200 of unemployment compensation received in 2020. The waiver is available to individuals and couples who have an adjusted gross income (AGI) of less than $150,000. Recently, the IRS updated its guidance allowing workers to exclude unemployment compensation from AGI calculations.

If you are waiting for a refund from your original tax return you should hold off until you receive it before filing an amended return. With regards to adjusting your original return to take into account the waiver on jobless aid, the IRS has said that taxpayers that have already filed should not file an amended return but wait for further guidance, the agency is retroactively applying the tax break to 2020 tax returns.