March 25th ***UPDATE**** This was brought to my attention!
While this will exclude the unemployment from the AGI, the Rescue Act specified 8 other tax and credit calculations that depend on the AGI were NOT to be affected by the Act.
In other words, simply entering this way can make 8 other calculations inaccurate. That is why it must be done in the software so those other calculations will use the AGI without regard to the change of the Unemployment Compensation Exclusion.
(The IRS worksheet was for paper returns and entering the change in a piece of paper will not change other calculations, but entering as misc income will change anything that depends on the AGI.)
Per the Act (and 1-8 below are sections NOT to be changed by the exclusion)
“(2) APPLICATION.—For purposes of paragraph (1), the adjusted gross income of the taxpayer shall be determined—
“(A) after application of sections 86, 135, 137, 219, 221, 222, and 469, and
“(B) without regard to this section.”.
(b) Conforming amendments.—
(1) Section 74(d)(2)(B) of the Internal Revenue Code of 1986 is amended by inserting “85(c),” before “86”.
(2) Section 86(b)(2)(A) of such Code is amended by inserting “85(c),” before “135”.
(3) Section 135(c)(4)(A) of such Code is amended by inserting “85(c),” before “137”.
(4) Section 137(b)(3)(A) of such Code is amended by inserting “85(c)” before “221”.
(5) Section 219(g)(3)(A)(ii) of such Code is amended by inserting “85(c),” before “135”.
(6) Section 221(b)(2)(C)(i) of such Code is amended by inserting “85(c)” before “911”.
(7) Section 222(b)(2)(C)(i) of such Code, as in effect before date of enactment of the Taxpayer Certainty and Disaster Tax Relief Act of 2020, is amended by inserting “85(c)” before “911”.
(8) Section 469(i)(3)(E)(ii) of such Code is amended by striking “135 and 137” and inserting “85(c), 135, and 137”.
**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
The following 8 areas are NOT to exclude the Unemployment Income from the AGI and therefore, direct input instructions into the TT software is NOT advised:
Social Security
Savings Bonds
Adoption
Retirement Savings
Interest Education Loans
Tuition Expenses
Passive Activity Losses & credit limits
Certain State Returns
