@Chrys1 wrote:
ok, so I am referring to Social Security and in particular the 2020 tax return. I appreciate you clarifying the difference between SS and SSI. However, the issue comes into play for those collecting SS widows benefits. More specifically, the federal government in 2020 under the CARESact exempted $10,200 of unemployment from being included in taxable income. The problem/issue comes in when calculating what percentage of tax you would pay on your SS using the "worksheet." The worksheet is not excluding the $10,200. In speaking with several individuals and even a legal tax agent from the IRS, I was told I needed to file an amended tax return for 2020 (1040X) because the software stated to include it on one end but take it off another end, which did not happen and I was taxed 85%. They did process the return a year ago and nothing has been changed as the IRS said it would be. So, in essence, the federal government excluded the $10,200 on the front end but failed to do so on the SS end. Does that make sense? We were not supposed to include the $10,200 when calculating unemployment, we were supposed to record the deducted amount and none of the software allowed for that so I had to manually go into the data section of my 2020 1040 and change it to reflect the correct amount. When I did that, it changed my EITC and several other items I should have been eligible for but wasn't because the worksheet in the software included the entire amount of unemployment.
The CARES act specifically stated that the taxable amount of SS must be calculated *before* excluding the $10,200 unemployment form AGI. there were 6 other credits that had to be calculated before the exclusion. Therefore the SS tax is the same whether you had unemployment or not.
**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.**
