On April 15, 2021, the Office of Tax and Revenue (“OTR”) issued Tax Notice 2021-06, which explained the effect on District taxpayers of the unemployment compensation exclusion in the American Rescue Plan Act (P.L. 117-2). In that notice, OTR stated that because federal adjusted gross income (“federal AGI”) is the starting point for calculating District tax liability, the federal exclusion for unemployment compensation should be reflected on a taxpayer’s District individual tax return (“Form D-40”).
Furthermore, OTR advised taxpayers who had filed a District return prior to the enactment of the American Rescue Plan Act to defer filing an amended return at that time until OTR issued additional guidance.
OTR is now advising taxpayers, who filed an original 2020 District tax return without reporting the unemployment exclusion, to file an amended return with OTR.
Filing Amended Returns:
Taxpayers who filed a return with the aid of a tax preparer should contact their preparer about filing an amended Form D-40.
Taxpayers who filed a return with the aid of tax preparation software should ensure that it is updated to the most recent version prior to filing an amended Form D-40.
Taxpayers who are filing an amended return by mail should include a copy of the 1099-GS that reports unemployment compensation.
Modified Federal AGI:
Because the IRS is automatically adjusting taxpayers’ returns, taxpayers should use the following methods to determine their modified federal AGI.
- Taxpayers who have received a notice from the IRS that it has adjusted their federal return that modifies their federal AGI, should enter that modified federal AGI on Line 4 of the amended Form D-40. See IRS News Release IR-2021-111. A notice of adjustment from the IRS should generally be received within thirty days after the correction has been made. District Form D-40 can then be completed using the modified federal AGI.
If taxpayers have not received a notice, they may calculate their modified federal AGI by using Schedule 1, Line 7, and the Unemployment Compensation Exclusion Worksheet–Schedule 1, Line 8. See IRS New Exclusion of up to $10,200 of Unemployment Compensation. Taxpayers can then calculate their modified federal AGI and enter it on Line 4 of the amended Form D-40. The amended return can then be completed based on the modified federal AGI.
OTR encourages taxpayers to file amended returns electronically. Taxpayers should consult their tax advisor or their software provider for instructions on how to file an amended return with OTR.
Taxpayers can also mail returns to the following address:
Office of Tax and Revenue
PO Box 96169
Washington, DC 20090-6169
Taxpayers may also use an OTR provided drop box located in the lobby of OTR’s office building located at:
Office of Tax and Revenue
1101 4th Street, SW
Washington, DC 20024
Taxpayers should consult with a tax professional or visit MyTax.DC.gov for information on credits they may qualify for under District law as a result of the exclusion of unemployment compensation from federal AGI and the filing of an amended District D-40 tax return as provided in this notice. If the additional credits are appropriate, they may be claimed on the same amended Form D-40.
For additional information, please contact the OTR ’s Customer Service Center at (202) 727-4829.