Unlike federal government, RI will fully tax unemployment benefits

Money

PROVIDENCE, R.I. (WPRI) — Any Rhode Islanders who received unemployment benefits during 2020 will have to pay state taxes on them.

Unemployment benefits are normally taxable income, but federal lawmakers included an exemption in the American Rescue Plan that was signed into law earlier this month.

Erica Guatieri, a local certified public accountant (CPA), said under the plan, recipients don’t have to pay federal taxes on “the first $10,200 of unemployment benefits received, if you had adjusted gross income of less than $150,000.”

On Sunday, the R.I. Department of Revenue sent out a news release explaining that the state’s tax law is remaining the same, meaning unemployment benefits will be taxed the same as always.

Guatieri reminded Rhode Islanders that they must add the federal exemption amount back into their state income.

“On your Rhode Island return, you would add back $10,200 of income into your Rhode Island taxable income so now it gets taxed at the Rhode Island level,” she said.

If you received out-of-work benefits in 2020 and haven’t filed your taxes yet, Guatieri said to wait because adjustments need to be made to the tax-filing software systems.

“Rhode Island’s still working on the form. They need to adjust their form for this modification,” she explained. “They haven’t actually said when that form will be ready. They need to then pass it on to basically all these tax software companies so they can adjust the forms for all of us using the forms.”

 For those who received benefits and already filed, they’ll need to amend their tax returns to include that income, according to Guatieri.

The tax-filing deadline was extended to May 17, and it’s unclear if anything else will change before that date.

Community Focus: Department of Labor and Training Acting Director Matt Weldon

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