UPDATE on the new rules on taxation of unemployment income (I’ll call them the NEW new rules) — jobless benefits no longer count toward the income “cliff” threshold.
Original guidance from the IRS (3/12/21) said that the $150,000 AGI limit includes unemployment income. As an example: if AGI without unemployment is $140,000 and unemployment is $12,000, then modified AGI is $152,000 and no exclusion will be allowed. (We have been recommending clients consider an IRA contribution in this case.)
Today (3/23/21) the IRS changed course 180-degrees and says now that modified AGI does NOT include unemployment income. This is great news… but my tax software JUST updated to the 3/12/21 guidance. Sigh.
More info here from Tax Speaker.
UPDATE: Good news for Illinois filers… the IDOR will comply with the changes from IRS, so no adjustments are needed on the IL return.
And please be patient with your tax professional.
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