Taxes have to be paid on unemployment advantages

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The Rhode Island Tax Department issued guidance on Sunday stating that Rhode Island residents and workers should continue to pay taxes on unemployment benefits despite changes at the federal level.

Rhode Island residents and workers will have to pay state taxes on unemployment benefits despite a change in federal law that allows taxpayers to deduct unemployment benefits from their federal returns.

The Rhode Island Tax Department explained the situation in guidelines issued on Sunday.

“Rhode Island will comply with current Rhode Island law regarding the tax treatment of unemployment benefits in Rhode Island,” Neena Savage, Rhode Island Tax Administrator, said in a press release.

“While Rhode Islanders receive a federal benefit, the department will comply with the current Rhode Island Income Tax Law in Rhode Island that mandates taxation on unemployment benefits,” said Savage.

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During the pandemic, Rhode Island lost 108,000 jobs due to coronavirus restrictions, but regained 63,700 of them.

Unemployment benefits are usually subject to both federal and Rhode Island income taxes, but on March 11, federal lawmakers passed law allowing most taxpayers to deduct the first $ 10,200 of their unemployment benefit from their 2020 federal returns, it said the Department.

The federal withholding applies if the taxpayer’s Adjusted Gross Income was less than $ 150,000 in 2020.

However, Rhode Island law hasn’t changed so all unemployment benefits are subject to Rhode Island taxes, according to the Tax Department.

Rhode Island taxpayers have an extra month to ensure they comply with both federal and state regulations. The Tax Department has postponed the deadline for filing your personal Rhode Island tax returns to May 17th.

In addition, the deadline for payments for the 2020 tax year has been extended to May 17. The move brought Rhode Island in line with deadline extensions announced by the IRS on March 17th.

The Rhode Island Tax Department provided taxpayers with the following guidelines at various stages of filing their tax returns:

If you have already filed your state income tax return and did not declare Unemployment Benefit as income, you will need to file an amended Rhode Island income tax return for 2020 and include it in your income (“Income Supplement”) for Rhode Island purposes.

If you did not file your 2020 Rhode Island personal income tax return, be sure to include your 2020 unemployment benefit as Rhode Island tax income regardless of how those benefits are treated for federal tax purposes.

Taxpayers must submit an application and pay the due amount by May 17th to avoid late fees.

If you have already submitted and received unemployment benefits, there is no need to take any further action provided you have submitted accurate feedback.

jperry@providencejournal.com

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On Twitter: @jgregoryperry