State income tax deadline pushed back to June, most 2020 unemployment benefits will be exempt from taxes

Emma McClatchey/Little Village

Iowans now have until June 1 to file their state personal income taxes returns. Iowa Department of Revenue (DOR) Director Kraig Paulsen signed an order extending the state tax deadline on Monday. That extension applies only to individual income tax returns, not business filings. It also does not delay the due date for any estimated tax payments.

The Internal Revenue Service announced two weeks ago that the federal income tax filing deadline was being pushed back from April 15 to May 17. Another change to federal income taxes is causing a change in the amount of state income tax Iowans who received unemployment benefits in 2020 will pay.

Normally, unemployment benefits are taxable, but as part of the American Rescue Plan Act President Biden signed into law on March 11, anyone who earned less than $150,000 last year will not have to pay taxes on the first $10,200 in unemployment benefits they received in 2020.

“Because Iowa is a state that automatically conforms with the Internal Revenue Code, certain unemployment compensation will not be included in Iowa income,” DOR explained in a statement. “Based on the federal legislation, the first $10,200 of unemployment compensation income is excluded from taxation for qualifying taxpayers.”

The IRS has published guidance for people who haven’t yet filed their 2020 tax returns on how to apply the unemployment tax exemption. For anyone who is eligible but filed before the tax break was signed into law, guidance from the IRS published last week stated: “If you have already filed your 2020 Form 1040 or 1040-SR, you should not file an amended return at this time. The IRS will issue additional guidance as soon as possible.”

According to DOR, the agency will automatically make the necessary adjustments to state tax returns that have already been filed. “Taxpayers filing an original 2020 individual income tax return should report the unemployment compensation exclusion amount on Form IA 1040, line 14, using a code of M,” DOR said in a statement published on Monday.

The department cautioned that the crosschecking involved in making sure the exemption is applied correctly may lead to delays in returns being processed, and therefore any refund being issued. DOR said it may take 90 days to process returns to which it is making the automatic adjustments.

According to DOR, its goal is to process state individual income tax returns and issue refunds within 30 days. In its statement on Monday, the departments said its current average time to complete a return and issue a refund is 28 days.

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