If American Rescue Plan makes $10,200 of UEC in 2020 tax free, and I get a new 1099-G, how do I amend return in TurboTax?

[NewYorkTaxpayer]

So I did review the changes TurboTax made in regards to unemployment compensation for my fiancee's return, which had already been filed.. It does appear that the changes TurboTax made (so far) did (correctly) decouple the change from the IRC in regards to unemployment compensation correctly (for now).  If NY does not enact any type of legislative action to change this by April 1, this is the correct behavior.  On the federal side, Schedule 1 does now have the offset value for UCE on Line 8, which eliminates the unemployment compensation she received on Line 8 of the 1040.  On the NY IT-201, Line 14 (Unemployment compensation) does still show the full unemployment amount, and is included as part of the NY AGI on Line 19 of that form.

Interestingly, the change that was made to unemployment also impacts her eligibility for claiming the EIC credit this year, as the change now makes her eligible - and when she originally filed, the UC pushed her over the threshold of eligibility.  We'll see what the IRS does in regards to recalculating the refund on the federal side (for her, it results in an additional $2200 refund from federal).  Due to the EIC change and how it carries over to NY, this also nets her an additional $300 from NYS.

What a mess -- even if the IRS does make the corrections on the federal return, we'll still need to file an amended return for her to take advantage of the changes it made to her NY return due to the EIC credit.  Thankfully, we are both fully employed and financially secure - so there is no rush to get the money.  I know others are not so fortunate.  Its more of an issue of my OCD in ensuring all of her paperwork is accurate.

[JPD6]

Has the IRS issued direction and has resulting Turbo Tax changes been completed? I thought I saw 3/25 as a date but I have not been able to amend yet. I have already received original refund. Whats next?

[rjs]

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@JPD6 wrote:

Has the IRS issued direction and has resulting Turbo Tax changes been completed? I thought I saw 3/25 as a date but I have not been able to amend yet. I have already received original refund. Whats next?

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@JPD6 

UPDATE March 31, 2021

The IRS has just issued an announcement about tax returns that have already been filed with unemployment. See my next post below.

[rjs]

@JPD6 

UPDATE MARCH 31

The IRS just issued the following announcement a few minutes ago.

IRS to recalculate taxes on unemployment benefits; refunds to start in May

So, for tax returns that have already been filed with unemployment income, the current IRS instructions are still to NOT file an amended return. The IRS will recalculate the tax return that you already filed, but it might take several months. See the IRS announcement for details. You should not do anything. Just wait for the IRS to take care of it.

For tax returns that have NOT been filed yet, TurboTax has been updated to include the $10,200 unemployment exclusion.

[julielastinger]

Have the state changes for KENTUCKY been completed yet?  I understand that the state return deadlines are still April 15, even though the federal deadline has been pushed back to May 17.  I really need to file mine for both, but I’m trying to wait until I’m sure that they’re both updated. Please advise!   

[NewYorkTaxpayer]

Thank you.. This is exactly what I needed to see.. In my fiancee's specific case, we need to file an amended return for her due to the fact that on the original return, she did NOT claim the EIC credit due to exceeding the income threshold to qualify.  The IRS announcement specifically states that an amended return is required if the EIC credit was not claimed on the original return.  

[holl22]

Federal returns can be filed, but depending on what state you received those unemployment benefits, it has been suggested to wait, as there are a handful of states that have not decided yet. New York "should" decide by 4/1 whether it will follow the federal guidelines or keep the unemployment taxable. 

[bjwilley56]

Turbo tax has updated my return and i am due an additional refund.   what do i do now? can i refile?

[rjs]

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@bjwilley56 wrote:

Turbo tax has updated my return and i am due an additional refund.   what do i do now? can i refile?

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@bjwilley56  You don't do anything. The IRS is going to recalculate your tax return and send you the additional refund. It might take several months to get it. For details see the following announcement, which the IRS just issued today.

IRS to recalculate taxes on unemployment benefits; refunds to start in May

[Critter-3]

@NewYorkTaxpayer 

You MUST wait for the IRS to correct the return and send the adjusted refund  BEFORE you try to amend anything.  Trying to amend before that time will mess things up and either the amended return will be refused/returned  OR   this will delay processing for months.  For those who now need to add the EIC they need to be patient while the IRS processes the change on the original return. 

[NewYorkTaxpayer]

Where was that spelled out in the guidance from the IRS?

"There is no need for taxpayers to file an amended return unless the calculations make the taxpayer newly eligible for additional federal credits and deductions not already included on the original tax return.

For example, the IRS can adjust returns for those taxpayers who claimed the Earned Income Tax Credit (EITC) and, because the exclusion changed the income level, may now be eligible for an increase in the EITC amount which may result in a larger refund. However, taxpayers would have to file an amended return if they did not originally claim the EITC or other credits but now are eligible because the exclusion changed their income."

This was the specific situation we ran in to -- the EIC credit was not claimed at all on the original return.  The amended return included the EIC credit.  I filed an amended return last night, and the IRS accepted the return shortly after.

[Critter-3]

SOP for  amending ...  rule #1 ... do NOT amend a return when the original is still being processed by the IRS.  You MUST WAIT for the original return AND any changes being made by the IRS to be completed since column A on a form 1040X  must match the last information the IRS has on file for you.  If you try to amend before this the IRS will either reject the 1040X  OR  this will take much longer to process than the usual 4 to 6 months.   PLEASE don't be in a hurry to get the extra money since that will backfire on you ... patience while everyone is navigating this unprecedented situation. 

[mefongfong]

Not sure if I am writing here is the right place.  My question is  :  When will TT Delux 10200 UEC Tax Issues be updated ? Simple question. 

[rjs]

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@mefongfong wrote:

Not sure if I am writing here is the right place.  My question is  :  When will TT Delux 10200 UEC Tax Issues be updated ? Simple question. 

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@mefongfong  What specific issues are you referring to? All versions of TurboTax have been updated to include the $10,200 unemployment exclusion on the federal tax return.

If you have further questions, please state whether you are using TurboTax Online or the CD/Download TurboTax software.

[Critter-3]

@mefongfong 

The correct letters are UCE = unemployment compensation exclusion and it will show up as such on the Sch 1 line 8.