The Vermont Department of Taxes has begun issuing refunds to eligible taxpayers who received unemployment insurance benefits last year and electronically filed their 2020 Vermont Individual Income Tax Returns prior to the federal unemployment tax exclusion passed earlier this year. These taxpayers can expect to see direct deposits or paper checks in the coming days or weeks without the need to file an amended return.
The American Rescue Plan Act of 2021 (ARPA) excluded up to $10,200 in unemployment compensation for individual taxpayers ($20,400 for married, filing jointly) for taxpayers with modified Adjusted Gross Incomes of less than $150,000. The Department identified over 22,000 total eligible taxpayers who filed their Vermont returns prior to ARPA’s passage and is adjusting most of those tax returns to reflect the correct taxable amount of unemployment compensation and Vermont tax.
Taxpayers are eligible for an automatic adjustment if:
- Their Adjusted Gross Income (minus unemployment benefits) is less than $150,000
- They received UI benefits in 2020
- They filed electronically before April 1st
- They did not take the UI benefits exclusion on their Vermont return
Taxpayers who did not already take the exclusion will need to amend their return if:
- They filed by paper
- The exclusion makes them newly eligible for tax credits like the Earned Income Tax Credit
- The Department is unable to determine the impact of the exclusion for a taxpayer. The Department is planning to contact these taxpayers directly.
For more information, go to tax.vermont.gov/coronavirus/unemployment-exclusion-adjustments