Will Unemployment Compensation Exclusion Worksheet affect on taxable social security. Does the $10,200 reduce my taxable Social Security on line 6b ?

[ladydede]

.I was puzzled by this and disappointed .  So we do get social security  wow so much money (not) my husband is the working old people.  He had to take SS for the big crash in 2008 and gets a very reduced amount.  We had no source of income then.  His work of 31 years then got rid of him and all the other old people.  He went back to work eventually  a no where job, because he had to.   So now  he is getting unemployment and the minus 10200 is added right back into the social security worksheet.  Am I right to see we pay taxes on the whole amount of unemployment anyway?  BTW Our income NOT even close to the 150K threshold

[fanfare]

@ladydede 

"Am I right to see we pay taxes on the whole amount of unemployment anyway?  "

No, IRS is adjusting tax returns and you will get a refund eventually.

[Chrys1]

I am sorry to inform you but you are incorrect. Even social security as well as the legal department in the IRS clearly stated that the exclusion of 10,200 is not included in the worksheet calculating taxes that you would pay on your social security. There is definitely an error within Turbo Tax but it is too technical to comprehend for most as I was told. So, when doing the worksheet, it does in fact exclude the 10,200. Another individual posted exactly how to correct the error by going into your return, clicking on Data Source and changing the total amount of income that is calculated to reflect a deduction of the 10,200. 

Think about it...the federal government excluded this amount at the last minute basically and no one's system was ready for it. As I was told, they would not exclude it from federal without also excluding it from social security for the amount you would be taxed (key word) and have to pay out of your social security for an amount that is excluded from your federal tax returns which includes social security. They won't credit you on one end and then tax you on the other. So, according to the IRS legal department (yes I got transferred 3 times before I got a correct answer), it is "excluded and if the excluded $10,200 is included in my social security worksheet used to calculate the taxes I would pay on Social Security widows benefits then I have to amend my return to exclude it in my calculations." I hope this helps settle the 'debate' 

[DoninGA]

@Chrys1 

So the information provided by the IRS on this IRS website is incorrect?

IRS website - https://www.irs.gov/forms-pubs/new-exclusion-of-up-to-10200-of-unemployment-compensation

When figuring any of the following deductions or exclusions, include the full amount of your unemployment benefits reported on Schedule 1, line 7 (unreduced by any exclusion amount): taxable social security benefits, IRA deduction, student loan interest deduction, nontaxable amount of Olympic or Paralympic medals and USOC prize money, the exclusion of interest from Series EE and I U.S. Savings Bonds issued after 1989, the exclusion of employer-provided adoption benefits, the tuition and fees deduction, and the deduction of up to $25,000 for active participation in a passive rental real estate activity.

[Chrys1]

I mentioned that exact thing to them because it is also on Turbo Tax. I was told that the IRS is going through returns to check for the error and contacting individuals but most will have to amend their returns to reflect the accurate amount. I've spent a full year researching this and obtaining information because I knew things didn't make sense. Social security tax calculations were obviously an afterthought Biden did not consider. Some I know were taxed on 95% of the miniscule they receive in Social Security. 

I just sent my amended return via certified mail today

[Nurex35]

I'm certainly not a authority in tax law but, if Social Security does NOT consider unemployment benefits as income...because it is "not earned", how is it even remotely possible to consider it "income" at all #1, when there is an Exclusion for it on the return from total income in general and #2,  but, it is still used to determine whether your Social Security Benefits are taxable, line 6b?  This makes absolutely no sense, notwithstanding the "tax law".  This typical of IRS "mumbo jumbo".  This is typical and why most people want to abolish the IRS!

First, there is one tax return and there is one unemployment exclusion.  You just can't pick and choose which schedules you can use it and which you cannot; it should be applied all through the return.  As one IRS agent pointed out, it has a "ripple effect" in the return meaning other schedules (and Worksheets) will be affected.  If the IRS has given an Exclusion for Unemployment Benefits received, than this exclusion should apply on every schedule or worksheet in the return....PERIOD!  An Exclusion for a particular income means "it doesn't exist"; in other words, not only you didn't earn it, we don't recognize that amount on your return at all.  Talk about "double speak", I'd like to know the IRS's rationale for penalizing social security filers for income not even recognized by the SSA!

[fanfare]

you're beating a dead horse. that was 2020.

Please recall that Congress changed the tax law on unemployment in March 2021 retroactive to 2020 after the tax forms were finalized. this caused huge problems, not the IRS's fault.

[Nurex35]

It's not a "dead horse" for me because I'm talking about 2020!   The IRS never refigured my 2020 return using the $10,200 Exclusion!

[DoninGA]

Amend the 2020 tax return so the UC exclusion will be included.

See this TurboTax support FAQ for amending a tax return - https://ttlc.intuit.com/turbotax-support/en-us/help-article/tax-return/amend-change-correct-return-a...

[Nurex35]

I attempted to do that.  However, when you go to the Worksheet to determine whether your SSBs are taxable(6b), whether you answer "yes, I am excluding UEC" or, "no I am not excluding UEC", the amount you get is the same and, when you continue on that Worksheet, there is NO line item for the exclusion.  The result is actually the same on the Worksheet that I used to prepare my 2020 1040-SR; most people do not realize that the SSB Worksheet you filled out prior to the announcement of the Exclusion is NOT the same one that the IRS created AFTER the Exclusion.

So, in my way of thinking is that the IRS is tricking you into thinking the Exclusion is now incorporated into your 2020 return and that somehow think your SSBs are not table when in fact they are.  Don't believe me?  Use the"old" Worksheet and then the "later" one; I bet your result is the same.  The fact is, unless there is a new directive OR, you decide to create your own line item for excluding UEC somewhere, the bottom line is that the tax law is STILL in place; i.e., UEC is NOT EXCLUDED when determining whether your SSBs are taxable; nothing from the IRS stated otherwise!   Sorry for the long msg...

[fanfare]

you need only to file 2020 Schedule 1 with line 7 showing your original UEC

and with line 8 showing the reduction as a negative number. (description : "UEC exclusion")

File 1040-X with your AGI  ( Line 1) reduced by 10,200 or line 7 whichever is less

In explanation Part III explain IRS missed adjusting your return.

If the final tax (1040-X line 6 ) is wrong for whatever reason, IRS will recalculate the correct tax for you and send you the correct refund.

you can do all this by hand without tax software.

Get the blank 2020 forms in fillable PDF from IRS.gov.

As you know, a 2020 1040-X has to be mailed in anyway.

Note: Do not include your old 1040 nor your revised 1040 because the Form 1040-X reflects any changes there and becomes your new tax return.

@Nurex35 

[fanfare]

if there were any other line items on your original Schedule 1, copy those to your new Schedule 1.

@Nurex35 

[ladydede]

They didn't correct and thanks all for the answers, I just now saw this Turbo let me know there were answers.  I wish they would have corrected  I hope I can figure this all out. 

[fanfare]

@ladydede 

follow carefully my instructions above from yesterday and you will get your refund.