Notice: Update to April 1, 2021 Notice Regarding the Treatment of Unemployment
Compensation for Tax Year 2020
Date: April 27, 2021
This Notice addresses the unemployment compensation exclusion (also, “unemployment
exclusion”) in the federal American Rescue Plan Act1
and its effect on the taxable income of
Michigan resident taxpayers under the Michigan Income Tax Act.2
This Notice is an update to the
Notice published April 1, 2021, and provides guidance to taxpayers who have already filed their
tax year 2020 returns.
On April 1, 2021, the Department issued a Notice explaining the Michigan individual income tax
impact of the American Rescue Plan Act’s (ARPA) exclusion of up to $10,200 of unemployment
compensation. That Notice explained that taxpayers who filed tax year 2020 income tax returns
may not have included the unemployment exclusion and may therefore be entitled to a refund.
Similar to guidance issued by the Internal Revenue Service, the Notice requested that taxpayers
refrain from filing amended returns while the Department explored potential automated
mechanisms for making unemployment exclusion adjustments to original returns without the need
for an amended return. Taxpayers were advised that additional guidance would be forthcoming.
The Department is now providing updated instructions about how to report the unemployment
compensation exclusion in Michigan for taxpayers who have already filed.
Filing Amended Returns to Report the Unemployment Exclusion in Michigan
The Department is requesting that all taxpayers who already filed an original 2020 Michigan tax
return without reporting the unemployment exclusion (for example, if the original return was filed
prior to the American Rescue Plan Act) now report the unemployment exclusion by filing an
amended Michigan tax return. Though the Department is still exploring potential automated
mechanisms regarding the unemployment exclusion, taxpayers are strongly encouraged to file an
amended return to claim any refund that may be owed to them. Any information regarding an
automated solution — if possible — will be communicated in future guidance from the
Department, but there is no current timetable or certainty for this option.
An amended return reporting the unemployment exclusion will allow many taxpayers to receive
an additional tax refund and allow for some other taxpayers to reduce a scheduled tax payment.
Depending on the taxpayer’s original return, the exclusion should be reported in accordance with
the following instructions:
1 Public Law No: 117-2.
2 MCL 206.1 et seq.1. Taxpayers who filed an original return and either claimed a refund or paid
the tax at the time of filing.
Taxpayers eligible to receive a refund due to reporting the unemployment exclusion include
taxpayers who claimed a refund on the original Michigan return and taxpayers who paid any tax
due with the filing of that original return. These taxpayers should file an amended Michigan
income tax return to claim that refund. In amending the return, taxpayers who claimed a refund on
the original return should check the box on Form MI-1040, line 31a, and write any refund received
from the original return on the line.
2. Taxpayers who filed an original return resulting in tax due, but scheduled a
tax payment for a future date, such as May 17, 2021.
A taxpayer who owed tax on their original return may have scheduled the tax payment for a later
date, such as May 17, 2021.
The unemployment exclusion may allow these taxpayers to reduce
the tax liability subject to that scheduled payment or eliminate that payment altogether. These
taxpayers should also file an amended return, but because the tax payment is pending, there are
• Before filing the amended return, the taxpayer should, if possible, cancel or stop the
pending payment by contacting the financial institution issuing that payment. If the
scheduled tax payment is cancelled, then the taxpayer must pay at the time of filing the
amended return any tax still owed – if any – on that return. In completing the amended
return, taxpayers should not write the amount of the original return payment on the
amended MI-1040, line 31b.
• If it is not possible to stop the payment, or if the amended return is filed after the scheduled
payment date, then the original return payment will be processed with the original return.
In this case, the taxpayers should claim a refund on the amended return. In completing the
amended return, check the box on line 31a of the amended MI-1040, and write the amount
of the original return payment on that line.
Instructions for Filing an Amended Return
The Department always encourages taxpayers to submit returns and in this case — amended
returns — electronically. Many software products that taxpayers used to file their original returns
have been updated to include this unemployment change for amendment purposes. E-filing the
amended return will ensure a greater level of accuracy and faster processing times. For any
3 The due date of tax year 2020 individual income tax returns was extended to May 17, 2021. See Notice: Automatic Extension for
Individual and Composite State Income Tax Returns Due on April 15, 2021 for more information. See also 2021 PA 8. taxpayer that chooses to paper file the amended return, that taxpayer should use Form MI-1040,
check the “Amended Return” box, and include Schedule AMD and all forms and schedules
submitted with the original return. For additional help, please visit:
The following must be submitted with any amended return:
• If the taxpayer has received it, proof that the IRS has adjusted the federal return due to the
unemployment exclusion such as, for example, a copy of a federal adjustment letter.
• Schedule AMD, Amended Return Explanation of Changes (Form 5530), and all forms and
schedules submitted with the original return.
• A copy of the 1099-G that reports unemployment compensation.
In addition, taxpayers should note that direct deposit of a refund is only available on an original
return, so refunds for amended returns will be sent as a paper check in the mail. Please ensure the
address on the amended return is correct.
Failure to follow the instructions within this notice may result in delays in processing a refund
claimed on the amended return.
The Department will process these amended returns in an expedited manner and issue refunds
accordingly. Interest on any refund will be computed in accordance with Section 30 of the Revenue
All amended returns remain subject to audit and review based on information received from
Following is a link to Treasury’s Notice: Treatment of Paycheck Protection Program (PPP) Loans Under the Michigan Income Tax Act
For taxpayers that have already filed, we’re asking taxpayers to wait on filing any amended Michigan return until we learn how the IRS will communicate (if at all) any adjustments they make to the states.
Notice: Automatic Extension for Individual and Composite State Income Tax Returns Due on April, 15, 2021
This notice provides taxpayers with information on the extensions of time to file returns and remit tax and the waivers from penalty and interest that the Department will grant in conformity with IRS Notice 2021-59.
IRS Notice 2021-59. On March 17, 2021 the IRS issued Notice 2021-59 providing extensions to May 17, 2021 for any individual with a return or payment due on April 15, 2020. IRS Notice 2021-59 did not extend the first quarter estimated tax payment due on April 15, 2021.
Michigan conformity with IRS Notice 2021-59. To conform to the automatic extensions granted through IRS Notice 2021-59, the Department will extend individual and composite State income tax returns and payments of 2020 taxes due on April 15, 2021 to May 17, 2021. Because the extension is limited to the 2020 taxes, first quarter estimates for tax year 2021 remain due on April 15, 2021. The extension is limited to the state individual and composite income tax annual return and does not apply to fiduciary returns or corporate income tax returns. This notice does not apply to city income taxes. City income tax taxpayers should contact their respective tax administrators for information regarding that city’s potential conformity with IRS Notice 2021-59.
Because the extensions in conformity with IRS Notice 2021-59 are generally applicable to individual and composite 2020 returns and any payment of 2020 taxes due on April 15, 2021, the following provisions have been modified:
1. Extension of Annual Return Filing and Payment Date for Individuals
The due date for the filing of the return and payment of tax based on the due date of the annual return has been automatically extended. For individual and composite taxpayers that file state returns otherwise due on April 15, 2021, the due date for the filing of the return and payment of tax has been automatically extended to May 17, 2021.
2. Extension of Date for Application and Payment for Extension Requests
The due date for any application and payment of tax related to an extension of time to file the annual return has also been extended. A taxpayer requesting an extension of time to file an annual return must therefore file an application and pay any tax with that extension request by May 17, 2021. The due date of the extended annual return, however, will not be modified by this notice. Accordingly, an individual or composite taxpayer requesting a 6-month extension of time to file a state individual income tax return must submit that request and pay the appropriate amount of tax by May 17, 2021, but the extended annual return remains due on October 15, 2021.
3. Penalty and interest
Penalty and interest will not accrue for the extension period that is automatically effective. Penalty and interest for late filing of the return and payment of 2020 tax will therefore not begin to accrue for most individuals until May 18, 2021. However, the suspension of penalty and interest is limited to the automatic extensions authorized under this notice; penalty and interest will continue to accrue as appropriate for taxes otherwise owed by any taxpayer.
The extensions provided throughout this notice are automatic. There is no need for taxpayers to include any additional information upon the filing of the return or otherwise contact the Department in advance to request an extension.
Additional information can be found at www.michigan.gov/taxes.
 The Revenue Act, MCL 205.1 et seq., does not prevent a compromise of interest or penalties, or both, and further permits the Department to waive penalties where reasonable cause can be established. The relief provided within this notice is based on the Department’s general statutory authorization authority to waive penalty and interest related to the filing of the annual return or the payment of tax after the statutory due date. Because this notice is based on the waiver of penalty and interest through May 17, 2021, the date set for filing the return for purposes of the statute of limitations under Section 27a of the Revenue Act remains the same.
Information for filing Michigan Taxes at this time this was the response from the State of Michigan
(The laws are evolving and we will strive to keep everyone up to date)
Based on how the American Recovery Plan reads, the $10,200 would not be in AGI and therefore would not flow to the Michigan return. I am not currently aware of any plans to modify the Michigan Income Tax Act to have the $10,200 added back. As for THR, the $10,200 would be included in there in accordance with MCL 206.510(1) as the unemployment waiver is specifically excluded from AGI.
Total House Hold Resources
Michigan Total Household Resources
FOR IMMEDIATE RELEASE
February 10, 2021
Contact: Ron Leix, Treasury, 517-335-2167
Individual Income Tax Return Processing Begins on Feb. 12
LANSING, Mich. – Michiganders who collected state unemployment benefits last year will not be required to pay penalty and interest related to underpaid estimated tax payments, according to the Michigan Department of Treasury.
Effective immediately, the state Treasury Department has granted an automatic waiver of all penalties and interest related to underpaid estimated tax payments owed by taxpayers who received unemployment benefits in 2020.
Under state law, taxpayers are required to pay quarterly estimated tax payments when the annual tax due is expected to exceed $500 or more. Taxpayers who fail to pay an estimated quarterly tax payment are typically subject to penalties and interest.
“Unemployment benefits have been a lifeline for many families during this pandemic, helping them put food on the table and pay the bills,” Gov. Gretchen Whitmer said. “Some Michiganders could have faced income tax penalties on their unemployment benefits, and I’m glad we can take prompt action to provide much needed relief for Michigan households.”
All taxpayers who received unemployment during the 2020 tax year will automatically receive this waiver. Because this waiver is automatic, taxpayers do not need to contact the state Treasury Department or provide any additional documentation for a waiver be applied.
“This is the right thing to do,” State Treasurer Rachael Eubanks said. “COVID has disrupted our lives in numerous ways – and many Michiganders are depending on unemployment benefits to get them by during this extraordinary time. Having to pay penalties and interest on unemployment benefits is the last thing individuals should be worried about when they go to pay their taxes.”
Unemployment benefits are subject to federal and state taxes. Taxpayers who chose to not have taxes withheld from their benefits will owe any outstanding tax.
Additional details related to waiver of penalties and interest on estimated tax payments can be found in the state Treasury Department’s Notice to Taxpayers, “Estimated Tax Penalty and Interest Waiver for Individuals who Received Unemployment Benefits in Tax Year 2020.”
The state of Michigan will begin processing state individual income tax returns on Feb. 12. For the benefit and convenience of taxpayers, both the beginning and end of the individual income tax filing season are the same as the Internal Revenue Service.
To learn more about the state of Michigan’s individual income tax, go to www.michigan.gov/incometax.
February 10, 2021