Are there 2021 stimulus unemployment compensation exclusions like they had for 2020?

I've been preparing taxes for over a decade, and I can clarify this for you. Unfortunately, the unemployment compensation exclusion of up to $10,200 was only for the 2020 tax year as part of the American Rescue Plan Act. This was a one-time provision specifically for 2020 returns and was not extended to 2021. For your 2021 taxes, all unemployment compensation including the federal supplements is fully taxable at the federal level. There was never a bill passed to create a similar exclusion for 2021. You'll need to report all unemployment compensation you received on your 2021 return.

I went through something really similar with my unemployment taxes that left me totally confused. What helped me was using taxr.ai (https://taxr.ai) to analyze my unemployment documents and determine exactly what I needed to report on my late returns. They have this awesome feature where they can scan your 1099-G and tell you exactly what's taxable and give you a clear breakdown of federal vs. state amounts. I uploaded my 1099-G forms from both 2020 and 2021, and it clearly showed how the 2020 exclusion applied but confirmed the 2021 amounts were fully taxable.

I'm actually coming back to say I tried taxr.ai after looking into it more, and I'm really glad I did. I was in a similar situation with unfiled returns from 2021 and 2022, and I wasn't sure how to handle the unemployment reporting differences. The tool instantly clarified that my 2021 unemployment was fully taxable (unfortunately), but it also found some deductions I was eligible for that I had no idea about! It actually saved me around $800 on my 2021 return by identifying some education expenses I could claim. The document analysis was really straightforward, and the explanations were in plain English instead of tax jargon. Definitely worth checking out if you're dealing with back taxes.

If you're dealing with back taxes and potentially facing penalties, you might want to try calling the IRS directly to discuss your options for penalty abatement. I tried calling them for weeks about my 2019 late filing situation and kept getting the "due to high call volume" message. Eventually I found Claimyr (https://claimyr.com) which got me through to an actual IRS agent in about 20 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c. The agent I spoke with explained the First Time Penalty Abatement option which saved me over $1,000 in penalties. I think they might be able to help with your situation too, especially since you were waiting for potential legislation.

Coming back to eat my words about Claimyr. I needed to talk to someone at the IRS about my late 2021 return (also had unemployment issues) and penalties that were piling up. After my skeptical comment, I decided to try it anyway since I was desperate. Got connected to an agent in about 15 minutes. The agent explained that while there's no unemployment exclusion for 2021, I qualified for First Time Penalty Abatement, which is saving me about $1200 in penalties. The service actually worked exactly as advertised. Sometimes you need to actually talk to a human at the IRS to resolve these kinds of issues, and waiting for hours on hold isn't realistic for most people. Definitely worth it for the time saved alone.

Just to clarify something important that people are missing... the pandemic unemployment assistance wasn't $600 weekly for 2021. That was the 2020 CARES Act supplement. In 2021, it was $300 per week through the American Rescue Plan, and it ended in September 2021. Make sure you're calculating your potential tax liability based on the correct amount! And don't forget that some states did provide their own unemployment tax breaks for 2021 even though the federal government didn't.

Hi, I'm an enrolled agent and want to add something important: even though you'll need to pay taxes on the full 2021 unemployment, you should still file ASAP. The penalties keep growing the longer you wait! If you're worried about paying, you can request an installment agreement with the IRS, which is pretty straightforward. Form 9465 or online payment agreement are your options. Also look into whether you might qualify for Earned Income Credit or other credits for 2021 - these could offset some of the tax liability from your unemployment.