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IRS 2021 Tax Deadlines Extended & Exclusion of Unemployment Compensation

Date: April 2, 2021

In continued response to the coronavirus pandemic, the Internal Revenue Service (IRS) announced that individuals have until May 17, 2021 to meet certain deadlines that would normally fall on April 15, such as making IRA contributions and filing certain claims for refund.

Additionally, Individual taxpayers who need additional time to file beyond the May 17 deadline can request a filing extension until October 15, 2021.

The American Rescue Plan, which was enacted late during the tax filing period on March 11, 2021, excludes from income up to $10,200 of unemployment compensation paid in 2020.  This means you don’t have to pay tax on unemployment compensation of up to $10,200. If you are married, each spouse receiving unemployment compensation doesn’t have to pay tax on unemployment compensation of up to $10,200. Amounts over $10,200 for each individual are still taxable. If your modified adjusted gross income is $150,000 or more, you can’t exclude any unemployment compensation.  This late in the year exclusion, while well intended to assist those most impacted during 2020, has created some additional complications in completing tax returns because these exclusions were not “built into” the 2021 tax forms.   This additional time to May 15, 2021 will enable tax preparers and individuals the ability to report the exclusion of these amounts from income.

It is important that we understand, the postponement of the federal tax filing deadline to May 17, 2021 applies only to individual federal income returns and tax (including tax on self-employment income) payments otherwise due April 15, 2021, not state tax payments or deposits or payments of any other type of federal tax. Taxpayers also will need to file income tax returns in 42 states plus the District of Columbia. State filing and payment deadlines vary and are not always the same as the federal filing deadline. The IRS urges taxpayers to check with their state tax agencies for those details.

Earlier this year, following the disaster declarations issued by the Federal Emergency Management Agency (FEMA), the IRS announced relief for victims of the February winter storms in Texas, Oklahoma, and Louisiana. These states have until June 15, 2021, to file various individual and business tax returns and make tax payments. This extension to May 17 does not affect the June deadline.

For more information on this or other questions, check the IRS’s FAQs and its page devoted to coronavirus issues.

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