April 9, 2021
Weeks after the Internal Revenue Service (IRS) said that taxpayers can exclude the first $10,200 in unemployment compensation from their 2020 tax returns, the New York State Department of Taxation and Finance has provided its own, decidedly different guidance for state tax filings.
In a statement on Thursday, New York State failed to follow the federal government’s lead and said that New York taxpayers are not allowed to exclude the first $10,200 in unemployment compensation from their 2020 taxable income. Indeed, the state taxing authorities said that the $10,200 taxpayers deduct from their federal adjusted gross income must be added back to their state income before they file their taxes.
The decision marks a notable departure from several other states across the U.S. that have followed the IRS guidance and allowed taxpayers to exclude $10,200 in unemployment compensation from their state taxes.
New York State’s ruling also creates complexity in tax filing that all Perlson LLP clients should consider.
If you’ve already filed your taxes and exempted $10,200 in unemployment compensation from your state taxes, New York State will now require you to amend your 2020 tax return and include the amount in your gross income. That will likely increase your tax liability and may require a payment to New York State. Federal tax returns will not need to be amended.
If you have not filed your taxes yet, Perlson LLP will be sure to make the required changes to your state return to ensure they’re in compliance.
As always, Perlson LLP is here for you to answer any questions or concerns you may have. Please feel free to call us at 516-541-0022 to discuss your tax situation, unemployment compensation, and how we can ensure your 2020 tax returns are in compliance.