topic Re: Will Unemployment Compensation Exclusion Worksheet affect on taxable social security. Does th... in Retirement tax questions

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

wdunn — Tue, 16 Mar 2021 14:36:19 GMT

Re: Will Unemployment Compensation Exclusion Worksheet affect on taxable social security. Does th...

KathrynG3 — Tue, 16 Mar 2021 14:58:03 GMT

No, the $10,200 does not include your taxable Social Security on Line 6b.

The $10,200 exclusion is for unemployment income, not social security. Social security is taxed differently depending on the rest of the income on the return.

For more information, see: New Exclusion of up to $10,200 of Unemployment Compensation | Internal Revenue Service

Is my Social Security income taxable?

Re: Will Unemployment Compensation Exclusion Worksheet affect on taxable social security. Does th...

SweetieJean — Tue, 16 Mar 2021 15:17:59 GMT

I think OP is asking whether the calculation of the percent of Soc Sec that is taxable (which is based on total income) is affected by the reduction in that total income if also receiving unemployment comp.

Re: Will Unemployment Compensation Exclusion Worksheet affect on taxable social security. Does th...

wdunn — Wed, 17 Mar 2021 03:49:51 GMT

I am not a tax person so i am waiting to see how Turbo handles this. But i was wondering when do you do the Social Security worksheet and will it lower my SS taxed income. If line 8 on 1040 is reduced then my total income on line 9 changes. This changes my taxable income on line 6b when i do the SS worksheet. I'm i right or wrong?

Re: Will Unemployment Compensation Exclusion Worksheet affect on taxable social security. Does th...

wdunn — Thu, 18 Mar 2021 19:36:59 GMT

The answer is blowing in the wind

Re: Will Unemployment Compensation Exclusion Worksheet affect on taxable social security. Does th...

Opus 17 — Thu, 18 Mar 2021 19:52:21 GMT

@wdunn wrote:

I am not a tax person so i am waiting to see how Turbo handles this. But i was wondering when do you do the Social Security worksheet and will it lower my SS taxed income. If line 8 on 1040 is reduced then my total income on line 9 changes. This changes my taxable income on line 6b when i do the SS worksheet. I'm i right or wrong?

Those of us who have actually read the law believe that even though the first $10,200 of UEC is excluded from taxable income, it is still included in the calculation of taxable social security. There are a series of carve-outs and exceptions in the law, and this was also posted someplace on the AARP web site.

However, the ultimate final confirmation would come whenever Turbotax is reprogrammed for the change, since the reprogramming has to be tested and approved by the IRS. One news site says Turbotax will be updated tonight or tomorrow, but I don't have official word on that.

Re: Will Unemployment Compensation Exclusion Worksheet affect on taxable social security. Does th...

ernesto3118 — Tue, 23 Mar 2021 02:39:23 GMT

My question, Is the unemployment compensation worksheet available in the Turbo tax program?

Because i have been unable to find it. Can You or any body found it already?

Re: Will Unemployment Compensation Exclusion Worksheet affect on taxable social security. Does th...

fanfare — Tue, 23 Mar 2021 03:31:23 GMT

the solution published by IRS and implemented by TurboTax and other tax software

has various side effects throughout your return, because your AGI is reduced.

Re: Will Unemployment Compensation Exclusion Worksheet affect on taxable social security. Does th...

Opus 17 — Tue, 23 Mar 2021 14:10:10 GMT

@ernesto3118 wrote:

My question, Is the unemployment compensation worksheet available in the Turbo tax program?

Because i have been unable to find it. Can You or any body found it already?

None of the worksheets are available to users of Turbotax Online. If you are using the desktop version installed on your own Mac or PC, I don't believe the program is updated yet for the unemployment exclusion, so I can't say where the worksheet will be located or what it looks like.

Re: Will Unemployment Compensation Exclusion Worksheet affect on taxable social security. Does th...

chobson5116 — Wed, 24 Mar 2021 13:25:22 GMT

According to what I am reading, jobless benefits are not counted as wages under Social Security's annual earnings limit. It has nothing to do with the $10,200. Is this correct?

Re: Will Unemployment Compensation Exclusion Worksheet affect on taxable social security. Does th...

chobson5116 — Wed, 24 Mar 2021 13:29:08 GMT

From what I am reading, it has nothing to do with the $10,200. Unemployment benefits are not considered earned and they don't count as wages under Social Security's annual earnings limit.

Re: Will Unemployment Compensation Exclusion Worksheet affect on taxable social security. Does th...

Opus 17 — Wed, 24 Mar 2021 13:46:08 GMT

@chobson5116

You are answering a different question than was asked. For purposes of determining how much Social Security benefits are taxable, the IRS considers all the recipient’s taxable income, there is no exclusion for unemployment compensation.

For purposes of determining if a retiree’s future benefits will be reduced because they earned too much income during retirement, unemployment compensation does not count as earned income. But that is not the question that was asked.

Re: Will Unemployment Compensation Exclusion Worksheet affect on taxable social security. Does th...

chobson5116 — Wed, 24 Mar 2021 14:08:52 GMT

Thank you, I do apology if I asked or answered a different question.

Thank you for answering my questions. With that said, when computing earned income for Social Security purpose, unemployment benefits should not be count as earned income. This makes a hugh difference in the outcome or results of where one will get a refund, smaller refund or owe. The $10,200 may reduce that amount, but what you are saying is that the unemployment benefits should not be counted. Correct?

Re: Will Unemployment Compensation Exclusion Worksheet affect on taxable social security. Does th...

Opus 17 — Wed, 24 Mar 2021 15:21:28 GMT

@chobson5116 wrote:

Thank you, I do apology if I asked or answered a different question.

Thank you for answering my questions. With that said, when computing earned income for Social Security purpose, unemployment benefits should not be count as earned income. This makes a hugh difference in the outcome or results of where one will get a refund, smaller refund or owe. The $10,200 may reduce that amount, but what you are saying is that the unemployment benefits should not be counted. Correct?

I think you are still confused.

When the Social Security Administration reviews your tax return to see if you earned too much income, and must reduce your future benefits, they don't count unemployment or other unearned income, just income earned from working.

However, for income tax purposes, ALL your other income is used to calculate how much of your social security benefit is taxable, including earned and unearned income. And, according to the AARP, even though the first $10,200 of unemployment compensation is excluded from income tax for 2020, it does still count to determine the amount of taxable social security.

They say that the American Rescue Plan Act specifically says that the excluded unemployment income is NOT to be subtracted in calculating the following.

Taxable Social Security
Savings bond interest exclusion for education
Employer-provided adoption benefits
Deductible IRA contributions
Student Loan Interest Deduction
Tuition and Fees Deduction
Passive activity loss limitation for rental real estate

These provisions are included in the law in the section called "Conforming Amendments" where the law specifies how the exclusion interacts with various calculations of "modified adjusted gross income" (MAGI) for various purposes.

Re: Will Unemployment Compensation Exclusion Worksheet affect on taxable social security. Does th...

fanfare — Thu, 25 Mar 2021 04:13:04 GMT

@chobson5116

The answer to your question appears to be no.

There are other areas where the reduced AGI will change your return.

For my niece's tax return, we found

Retirement Savings contributions credit, increased
Earned Income credit, increased.

It will depend on the circumstances of your tax return.

We will be looking carefully to see that the IRS's refund includes these amounts.

Re: Will Unemployment Compensation Exclusion Worksheet affect on taxable social security. Does th...

scaffrey — Sat, 27 Mar 2021 13:59:46 GMT

Turbotax has updated their desktop versions. Unfortunately they have an error, either in their instructions or in their calculations. And their phone support on this is not very good.

1. On schedule 1 where they calculate the amount of unemployment that is taxable, things are good. As an example consider that the the unemployment amount (LINE 7) is $15,200. LINE 9 then is the taxable unemployment: $15,200 - $10,200 = $5,000.

2. The form called Social Sec is where the error occurs. This form calculates amount of Social Security benefit that is taxable. Line 3 is the sum of lines 2a, 2b, 3b, 4b, 5b, line 7 from your 1040. AND LINE 9 FROM SCHEDULE 1. From above LINE 9 is $5,000. What turbotax is using is LINE 9 from Schedule 1, which is the entire unemployment about ($15,200).

Either turbotax is referencing the wrong line from Schedule 1 in their instructions for line 3 in Social Sec or they are adding in line 7 when they should be adding in line 9.

The net result is that the calculations they are using do NOT exclude the $10,200 from determining how much social security is taxed. This is consistent with answers I've seen in this blog (unfortunately!). Turbotax needs to clean this up.

But as I said I'm not sure they have phone folks that are able to follow what's going on.

Re: Will Unemployment Compensation Exclusion Worksheet affect on taxable social security. Does th...

Kenny4187 — Mon, 12 Apr 2021 17:04:05 GMT

Any update?

Re: Will Unemployment Compensation Exclusion Worksheet affect on taxable social security. Does th...

DoninGA — Mon, 12 Apr 2021 17:06:36 GMT

@Kenny4187 wrote:

Any update?

Update for what?

The unemployment compensation exclusion was updated across all TurboTax platforms, online and desktop, on 03/26/2021.

The exclusion is reported on Schedule 1 Line 8 as a negative number. The unemployment compensation received is on Line 7 of Schedule 1. The result flows to Form 1040 Line 8.

Click on Tax Tools on the left side of the screen. Click on Tools. Click on View Tax Summary. Click on Preview my 1040 on the left side of the screen.

Re: Will Unemployment Compensation Exclusion Worksheet affect on taxable social security. Does th...

Kenny4187 — Mon, 12 Apr 2021 17:47:35 GMT

Sorry I should have been more clear. I was asking about the update to Scaffrey's concern approx 2 weeks ago. I had understood what you replied, but the concern is not being answered. The concern isn't about lines 7 or 8 of schedule 1 themselves. The question is about the social security worksheet # 3 which asks for the amount of line 9 in schedule 1. So to put it short, if the final computation of lines 7 and 8 of schedule 1 are to be placed in line 9 of the same schedule, than that same number should be used in the social security work sheet #3. But the problem is turbotax is not using the amount in line 9 of schedule 1. Its using the amount of line 7. I hope I was a bit clearer now. Refer to Scaffey's post for the original concern.

Re: Will Unemployment Compensation Exclusion Worksheet affect on taxable social security. Does th...

dfschmagel — Wed, 14 Apr 2021 20:24:08 GMT

I believe your response to be incorrect. On the SS Benefits worksheet, line 3, it specifically ask to add the income amounts from lines1, 2b, 4b, 5b, 7 and Sched 1 (Form 1040), line 9. Line 9 is AFTER the 10,200 exclusion for Unemployment Benefits under ARPA, which shows up on line 8 as a negative amount (-10,200 if the total unemployment benefits were over that amount)

In TurboTax Home and Business 2020, there is an anomaly regarding this. While the figure calculated on line 3 uses all the above lines from the 1040, when it comes to the amount for Sched. 1, line 9, the exclusion amount of $10,200 is added back to the total. Here is the anomaly: When you click on the figure in the forms view and select Data Source, the breakdown includes the correct amount for what shows on Sched 1, line9. I had to override the figure in Forms view to delete the $10,200 which was erroneously included in the line 3 total.