Do I need to amend my 2020 tax return

[rcwooly82]

I efiled my 2020 federal and state returns on 3/19/20.  I have not paid the tax owed to federal yet.  State was a small refund which I have received.   Now there is the change of the unemployment deduction which will reduce my federal amount due and increase the state refund.  Do I need to file an amended federal return to reduce my amount due, or do I pay the original amount due and wait for the IRS to make the adjustment and send me the refund?  I also live in Illinois which requires an amended return to included a federal pro-forma 1040 and schedule 1 showing the computation of the adjusted AGI  to make the unemployment adjustment.  What do I do?

[ToddL99]

You do not have to file an amended federal return - the IRS will automatically update your federal return to reflect the change in tax for unemployment compensation.

Since Illinois requires a pro-forma federal return showing the change, you will have to go through the TurboTax amendment process to generate an amended IL return with federal updates - just don't file the federal amendment. Print and file the IL amendment by mail.

See How do I amend my 2020 return?

From the IRS New Exclusion of up to $10,200 of Unemployment Compensation:  If you have already filed your 2020 Form 1040 or 1040-SR, there is no need to file an amended return (Form 1040-X) to figure the amount of unemployment compensation to exclude. The IRS will refigure your taxes using the excluded unemployment compensation amount and adjust your account accordingly. The IRS will send any refund amount directly to you. 

[nstebbins1975]

i so your telling me that i do not to amend my taxes and just wait for the irs to make the amendment for me

[LinaJ2020]

The email refers to, other than the unemployment exclusion, if you qualify for any additional credits and deductions due to a lower AGI, you should amend your federal tax return.  If the only reason you amend is the unemployment exclusion, you do not need to amend. They will re-calculate your taxes and send you the refund.  

 For details from the IRS, click here:  No amendment

Per IRS, "There is no need for taxpayers to file an amended return unless the calculations make the taxpayer newly eligible for additional federal credits and deductions not already included on the original tax return."

@nstebbins1975

[C3llyc3l]

So in my case I do not have to file an amendment for unemployment changes but how will I know if I need to file an amendment for EIC that I didn’t qualify for before? Do I wait for amendment done by the IRS? 

[ThomasM125]

@C3llyc31 It would be best to wait to see if the IRS includes your EIC when they refund your tax based on the unemployment income exclusion. If you file an amended return in the interim, it may slow down the processing of your refund by making things more complicated.

[Critter-3]

Step 1 ... WAIT for the IRS to correct the return and send the new refund.

Step 2 ... use the amendment process to see if you now qualify for any other credits  and amend the state return if needed.  

[kostopst]

I too forgot the Unemployment Compensation Exclusion in my 20202 tax returns. I now got a notice CP11 from IRS that they reduced my Recovery Rebate Credits! Instead of reflecting the UC exclusion!!

If you wait for the IRS to give you the UCE it may not happen! I tried calling the IRS but the lines are busy and they ask you to call another time(...)

Therefore, I re-ran the TurboTax, and I do qualify for the UCE and the RRC, which reduces my taxes a lot. Hence I will file an amended 1040X plus all the supporting schedules again, just to be on the safe side. I hope that I can e-file the amended, but it seems that we may have to send it via snail mail...

And I will send them a letter of disagreement with the CP11 notice.

[VolvoGirl]

@kostopst   You have 2 different things going on.  When did you file?  Was it before the unemployment exclusion?  ThT May still be Adjusted, unless you have a high income.  If you already filed and didn't get the 10,200 unemployment exclusion you do not need to amend.  The IRS will be adjusting it for you.  See,

https://www.irs.gov/newsroom/irs-to-recalculate-taxes-on-unemployment-benefits-refunds-to-start-in-m...

Then for the Recovery rebate credit.  Did you not get the full amounts before or qualify for more?   A common adjustment is if you claimed the Recovery rebate credit on 1040 line 30 when you already got the the first 2 Stimulus payments or got the second one after you filed or reported the wrong amounts or entered the wrong amounts in the 2 boxes.  If you entered the total you got for both rounds in the same box it would think you didn't get the other one.  The IRS knows how much they already sent you.

[kostopst]

I filled in early March, before the UCE adoption, so it was not reflected in my original 2020 tax returns. I did not get any stimulus in 2020 due to high income in 2019. But I qualify for the RRC based on lower income in 2020.

The IRS just sent me the CP11, with lower RRC, and no explanation why. No mention of the UCE!...

After I re-ran the TurboTax, it now reflects the UCE, and the resulting higher RRC. Hence much lower taxes due. Since I already paid, I should get a big refund.

So at this stage I have to file the amended, otherwise I have no way to correct things.

[Critter-3]

STOP and take a deep breath.  If the IRS sent the a notice with the lower bill  then you need to be patient while they refigure the return for the reduced income and increased credit  and send the corrected amount which should be sometime in May or June.  The IRS will take into consideration the payment you already made.  DO NOT send in an amended return yet  ... doing so may actually slow things down.   

Next for the third stimulus payment ... if you are eligible for some of it then the IRS is also sending them out based on the filed 2020 return.   Nothing you can/need  to do about this or speed up the process at this time.  Just be patient. 

[BE25]

I filed my fed tax return electronically before the update for the UCE hit. The IRS sent me a notice of the UCE adjusted taxes owed.  They are simply taking the the figures from 1040 line 24  of the original filing (taxes you owed when you filed your return) and subtracting the figure from 1040 line 24 of the UCE adjusted return (Payments and credits).  Then they bill you for the difference.   They even neglected to credit the payments I made on my tax return (with holdings and taxes owed on the UCE adjusted return).  This is not reflective of the actual taxes owed on the amended tax return that Turbotax generated when the update hit.  Eg; your original line 24 is $2000, your UCE adjusted line 24 is $1000.  The IRS is saying that you owe $1000 in taxes even though you have paid $500 in with holdings and $200 in taxes owed on the return, both of which the IRS has failed to add to the "Payments and credits".  I don't know about anyone else, but I will be filing an amended tax return.  Oh, and good luck getting a live person on the IRS phone line, you might as well use a carrier pigeon.

[kostopst]

BE25, did you have any Recovery Rebate Credits? (stimulus money). The UCE adjustment would also increase any RRC that you're owed. Because a lower AGI after the UCE implies a higher RRC.

I agree, the correction you mentioned the IRS did is not the proper tax calculation.