The Colorado Department of Revenue commented on an IRS announcement that the IRS will take steps to automatically refund money to taxpayers who filed their tax return reporting unemployment compensation before the recent changes made by the American Rescue Plan.
“This is great news that will greatly simplify the process for those who have already filed federal returns to get their federal taxes paid back and help provide more relief to Coloradans who have been hardest hit by this pandemic,” Gov. Jared Polis said in a Department of Revenue news release. “As we recover, we want to do everything we can to help Coloradans get back on their feet. We will continue to work with the federal government to get taxpayer money back as new information becomes available.”
Colorado’s income tax statutes do not incorporate retroactive federal statutory changes that are enacted after the last day of a taxable year, according to the release. As a result, the American Rescue Plan Act will not impact state income tax returns for the year 2020, including the taxation of unemployment compensation.
"Colorado taxpayers who are still preparing to file their 2020 state tax return are still required to add back the amount of unemployment compensation excluded from their federal taxable income in accordance with the American Rescue Plan Act," the release said. "This amount should be added to line 6 (other additions) of their Colorado Individual Income Tax Return, along with any other addbacks required by law. In the explanation field, enter 'Unemployment Compensation.' Refer to pages 5 and 6 of the instructions in the Colorado Individual Income Tax Filing Booklet (DR 0104 Book) for details on other additions."
The booklet and other income tax forms are available at Tax.Colorado.gov/Individual-Income-Tax-Forms.
Taxpayers with questions can call the tax information hotline at 303-238-SERV (7378) Monday through Friday from 8 a.m.-4:30 p.m.
For questions regarding 1099-Gs issued for unemployment benefits, contact the Colorado Department of Labor and Employment at 303-536-5615.
Visit TAX.colorado.gov for more information.