Has anyone else found Turbotax wrongly calculates the unemployment compensation exclusion for married filling jointly in community property state?

[VolvoGirl]

If you got both the first 2 Stimulus payments then line 30 should be Blank.   Line 30 is only if you didn't get one or qualify for more, like if you added a dependent.  

Sounds like you answered the questions wrong and said you didn't get the Stimulus payments so it gave you credit for them again.  Or entered the wrong amounts you already got.   The IRS knows they already sent you the Stimulus payments.

[reallymeamom]

Oh, I get it now.  That is exactly what happened.  Thank you so much for clarifying. You are a time saving angel.

 I blame myself for the bad news.   (I'm still considering that day drink to soften the blow of now having to pay the IRS over a grand🤨😭) 

[Circlespinner]

To add to my previous message I am not in a community property state.  The IRS calculated my exclusion at 20,400  ( 10,200 * 2) on a joint return.  My spouse earned no unemployment compensation.  Based on the IRS calculation and my reading of the instructions, the credit appears to be available per spouse up to a max of 20,400 in unemployment compensation,  regardless of if only one spouse earned unemployment.  Turbo Tax does not handle it that way.

[rjs]

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@Circlespinner wrote:

To add to my previous message I am not in a community property state.  The IRS calculated my exclusion at 20,400  ( 10,200 * 2) on a joint return.  My spouse earned no unemployment compensation.  Based on the IRS calculation and my reading of the instructions, the credit appears to be available per spouse up to a max of 20,400 in unemployment compensation,  regardless of if only one spouse earned unemployment.  Turbo Tax does not handle it that way.

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@Circlespinner 

TurboTax doesn't handle it that way because it's wrong. Either the IRS made a mistake, or there's a mistake in your tax return that you haven't spotted. Here are a few possibilities.

1.  When the IRS recalculates a tax return that was filed without the unemployment exclusion, they do the calculation manually. It's possible that the person who recalculated your tax return simply made a mistake.

2.  The calculation is based on the address that's on your tax return, not the state where you worked or collected unemployment, if it's different. Is the mailing address on your tax return in a community property state? (You could have used a mailing address in a community property state, even if you don't live there.) The community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.

3.  If you had more than one 1099-G, you might have mistakenly entered one of them as belonging to your spouse. When you enter a 1099-G in a joint tax return in TurboTax, one of the questions is whose name is on the 1099-G. One of the names is selected automatically. If the wrong name is selected, you have to click the other name.

[Circlespinner]

@rjs 

Just the one 1099-G for NY for myself and mailing address is in NY.  That would just leave the IRS mistake if your take on the rule is accurate.  I read that the IRS performed the recalculation and sent refunds to 13 million tax payers who earned unemployment and filed before the exclusion rule became law.  I have a hard time believing the IRS would process all these returns manually to arrive at the modified refund amount. From where did you learn that these were processed manually?

[rjs]

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@Circlespinner wrote:

That would just leave the IRS mistake if your take on the rule is accurate.

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The IRS does make mistakes.

It's not just my take on the rule. It is the rule. See the IRS instructions for calculating the exclusion at the following link on the IRS web site, and in the attached pages from the IRS instructions for Schedule 1 at the bottom of this post.

2020 Unemployment Compensation Exclusion FAQs — Topic B: Calculating the Exclusion

Since you got a larger refund than you expected, you have two choices.

1. Spend a lot of your own time and effort trying to convince an overburdened and unresponsive IRS to let you pay back the excess
2. Do nothing. If you choose to do nothing, there is a slight possibility that sometime in the next three years the IRS will review your tax return, discover their error, and make you pay back half the refund that you received.

TurboTax is doing the calculation correctly, as you can see from the IRS instructions that I referenced above.

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@Circlespinner wrote:

I have a hard time believing the IRS would process all these returns manually to arrive at the modified refund amount. From where did you learn that these were processed manually?

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This is one of the reasons that the IRS is so severely backlogged this year that it's taking 6 months or more to process routine tax returns. They had to choose to either do it manually, or spend a lot of time and effort to create and test an automated system to perform a one-time process.

I don't remember where I found out that they're doing it manually.