UNDATED – Today, the Indiana Department of Revenue (DOR) issued guidance for individual income tax filers who received unemployment compensation in 2020.
Additionally, DOR issued a new worksheet for customers to use when claiming the state’s existing unemployment compensation tax deduction on their 2020 Indiana individual income tax return.
On April 22, the Indiana General Assembly passed an update to Indiana’s conformity to the Internal Revenue Code (IRC), but specifically decoupled from certain provisions of IRC, and Governor Holcomb signed this into law on April 29.
As a result, Indiana taxpayers cannot use the federal unemployment compensation exclusion on their 2020 Indiana individual income tax returns and that income must be added back in. They may, however, still be able to deduct some portion of their unemployment income on their state tax return in accordance with Indiana’s current tax laws.
“Our teams are working diligently in response to these directives to minimize the impact to our customers and provide additional information and instructions regarding these recent changes,” said DOR Commissioner Bob Grennes.
Hoosier taxpayers who have been waiting to file their taxes should do so by the May 17, 2021 deadline.
Individuals who are not able to file by May 17 can file an extension directly with DOR or with the Internal Revenue Service (IRS). If the IRS extension is granted, the Indiana extension is automatically granted. A timely filed extension moves the federal tax filing deadline to Oct. 15, 2021 and the Indiana filing deadline to Nov. 15, 2021.
It is important to note that the extension only shifts the filing deadline and not the payment deadline. Ninety percent of the taxes owed are still required to be paid by May 17, 2021 to avoid penalties and interest.
Those who use a tax preparation software, online services or a paid tax professional to prepare their tax return should check for information from their vendor or preparer regarding software updates or instructions to add back unemployment income excluded from their federal adjusted gross income.
Those not using tax preparation software or online services can refer to DOR’s website for additional instructions and a revised Unemployment Compensation Worksheet to calculate and deduct the nontaxable portion of unemployment income.
Taxpayers who received unemployment income in 2020 and have already filed their individual income tax return should not file an amended return at this time. DOR will be providing additional information for these customers soon.
For more information on filing state taxes, visit DOR’s website at dor.in.gov and click on the “Learn More” button under “Unemployment Benefits and Taxes”.