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TurboTax is reporting that the American Rescue Plan will include some form of 2020 unemployment relief.
The bill also makes the first $10,200 of unemployment income tax-free for households with income less than $150,000. This provision would be retroactive to tax year 2020 (the taxes you file in 2021).
It is not clear how or when the IRS will implement the new law. At this point, if you have already filed your 2020 Federal 1040 tax return, it is not clear whether amended tax returns will be required or not. It is possible that the IRS could compute a refund of 2020 Federal 1040 tax returns that have already been filed, accepted and refunded.
At this time amended tax returns will not be available before March 18. See forms availability here.
The IRS considers unemployment compensation to be taxable income which you must report on your federal tax return. State unemployment divisions issue an IRS Form 1099-G to each individual who receives unemployment benefits during the year. States vary in how they tax unemployment compensation.
IRS information updates can be found here. TurboTax information updates can be found here.
@JamesG1 I understand that we all have to wait for the IRS guidance on how the UIB tax forgiveness will be handled. But my situation is unique. I already filed and Owe $1,000+ and have it set up to be paid 4/15/21. After the tax forgiveness is computed, I would get a refund. Whether I need to file an amended return or not, is it safe to Cancel this automatic withdraw for a tax payment? Or do I need to pay it on 4/15 and then file an amended return to reclaim it.?
It is your choice to pay the balance due then get a refund later or not pay and have to answer a possible letter later from the IRS ... it is up to you to decide what your comfort level will be. It is very possible that the filing deadline will be moved again to possibly 6/15 similar to last year so keep watching for the IRS instructions in the next couple of weeks.
So if you haven’t filed yet and your unemployment benefits meet the tax exemption requirements would you just exclude entering the 1099-G? Or is it better to wait until more information is released?
@sealevel wrote:
So if you haven’t filed yet and your unemployment benefits meet the tax exemption requirements would you just exclude entering the 1099-G? Or is it better to wait until more information is released?
You will need to wait until the IRS issues guidance on how to proceed. Hopefully this will be in the next few weeks.
After the legislation has passed Congress and after the President has signed the legislation and after the IRS has written the rules, regulations and procedures. And after the IRS has changed any forms or schedules to accept the tax code changes. And after the IRS has approved the changes in the TurboTax program that apply to the tax code changes, then it will be available for the users of the tax preparation software.
This can take anywhere from several weeks to several months before it becomes available.
See this TurboTax support FAQ for information on the American Rescue Plan - https://ttlc.intuit.com/community/tax-topics/help/how-will-the-stimulus-package-impact-me/00/1393859
Well TurboTax, let's hope someone gives us some direction soon. We filed already and have payments coming out to the IRS and the state soon. It would be nice to get a definite answer.
Ok ... first if you have the payment coming out soon then STOP the payment by either not having enough in the account OR calling the feds/state to stop the debit. Otherwise let the payment happen then you will get it refunded later.
Then wait for the IRS to post information on when amending can be done.
My professional program has an update tomorrow for new returns with the unemployment on it so we can finally file returns correctly but amending filed returns are still in limbo so all everyone can do is wait patiently.
I'm not worried about the payment coming out, no intentions of stopping it, that would just mess everything up! Are you sure there will be a refund coming for those who paid those taxes? And would an amended return have to be done to get that, or will they automatically calculate who should be refunded. And what if the final word on how to proceed comes after the 15th deadline, how would that work. Just a lot of unknowns. Too bad turbotax wouldn't send us an email stating how to proceed when it gets clarified...
You are among millions who have now been affected by a mid-tax season change in the tax law. Patience will be necessary.
TurboTax will update the software for the unemployment but there is no timeline yet.
If you have not e-filed yet—-wait. And if you already e-filed and want to amend for this—WAIT.
Please read this very recent news from the IRS:
https://www.irs.gov/newsroom/irs-statement-american-rescue-plan-act-of-2021
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