The New York State Department of Taxation and Finance recently updated their New York State tax implications of recent federal COVID relief webpage, adding the following FAQ to their list of Frequently Asked Questions about how the State will treat specific relief provisions for tax purposes.
The federal American Rescue Plan Act of 2021 includes a provision that allows individuals to exclude up to $10,200 of unemployment compensation from federal tax. Does this exclusion also apply to New York State?
No. Under longstanding New York State law, unemployment compensation is subject to tax, which means you should report the full amount of unemployment compensation on your New York State personal income tax return. If you exclude unemployment compensation on your federal return, as allowed under the American Rescue Plan Act of 2021, you must add back the excluded unemployment compensation on your New York State return.
Form IT-558, New York State Adjustments due to Decoupling from the IRC, has been updated to report this add-back as adjustment code A-011. See Personal income tax up-to-date information for 2020 (Articles 22 and 30).
- If you have not yet filed your 2020 New York State return, and file using software, the software should already account for this update and add back the unemployment compensation excluded from federal gross income. If you do not file using software, make sure to add back the federal unemployment compensation exclusion.
- If you already filed your 2020 New York State return, and you did not add back unemployment compensation that was excluded from your federal gross income, then you must file an amended return with New York State. If you did not exclude unemployment compensation from your federal gross income, do not file an amended return with New York State.
Please contact your Tronconi Segarra & Associates tax advisor if you have any questions about New York State or other states’ tax treatment of unemployment compensation received in 2020.