Important Filing Updates June 2021 Tax News

There were two recent important updates posted to FTB's website that we wanted to make you aware of because these may impact some of your clients' 2020 and prior year returns.

The first update, regarding unemployment and 2020 tax returns, explains what happens when someone receives unemployment compensation and either initially qualified for the CalEITC or may now qualify due to recent changes under The American Rescue Plan Act of 2021 (ARPA).

The ARPA excluded a certain amount of unemployment insurance compensation from federal adjusted gross income (AGI).  These changes may allow filers to receive additional money from California tax credits and other benefits, including:

• California Earned Income Tax Credit (CalEITC)
• Young Child Tax Credit (YCTC)
• The Golden State Stimulus payment

Importantly, for many who have already filed for 2020, they will not have to do anything to receive these additional benefits. Others though will need to take specific steps to receive their allowable credits and payment. Additional information is available on FTB's website by searching for "unemployment and 2020 tax returns" or by clicking on the link above.

The second update may impact those who received income from a Medicaid waiver or the In-home Supportive Services (IHSS) program for providing care to someone they lived with. These individuals may now elect to include or exclude all or none of their IHSS or Medicaid waiver income from their earned income. This in turn may allow them to be eligible for the CalEITC (or qualify for more) along with other credits and benefits.

This change resulted from the Office of Tax Appeal's precedential opinion in the Appeal of F. Akhtar and M. Akhtar (2021-OTA-118P) which became final on May 5, 2021.

Additional information is available on FTB's website for those who want to file a timely claim for refund for the CalEITC for the 2016 – 2020 tax years. For many filers, all they will need to do is download and submit an FTB 3514.  Go to FTB's website and search for "In-home Supportive Services" for more information.