Unemployment tax exclusion and AGI

[Glitch1]

My income is less than 150 before Unemployment but more after it.  Any ideas how this new law will effect me?

[Critter-3]

Open your return in the program to see how the changes affected your bottom line of the return.   Then since your AGI was below the $150K mark you may get more or some stimulus credit on the return and will trigger a "plus up" of the third stimulus payment to be released.  

[Life-Is-Good]

I’ve been wondering the same thing and can’t really find info out. Have you found any answers?

[rjs]

---

@Life-Is-Good wrote:

I’ve been wondering the same thing . . .

---

@Life-Is-Good  The same thing as what? This is a long, old thread that discusses several different topics. And we can't tell which post you are replying to.

If you are wondering about your eligibility for the unemployment exclusion, the $150,000 cutoff applies to your AGI not including any unemployment income. So if your AGI, excluding any unemployment, is less than $150,000 you are eligible for the exclusion. The answer posted by LenaH to your question a few weeks ago was wrong.

If you have a different question, I suggest that you post a new question of your own, and give all the details of your specific situation, instead of tagging on to an old and confusing thread.

[Life-Is-Good]

Sorry, my question must not of replied to the right one. But yes, thank you, you answered my question.

[joeygamb]

@rjs So you may have just addressed my question, but let me post my specific case.

My AGI for my wife and I is showing $171,000. 

We had $20,000 of Unemployment Income.  ($16,000 from me, $4,000 from wife)

Right now it is saying we are not eligible for the roughly $14,200 (which is $10,200 for me plus $4,000 from wife) deduction because our AGI is over $150,000.

So are you saying if we can reduce our AGI by $1,001 (which would bring our AGI to $169,999), it would then make us eligible for the Unemployment Compensation Exclusion of the $14,200?  Because you are saying the cutoff applies to AGI not including Unemployment Income...which would be $149,999 ($169,999 - $20,000)

And if that's the case, can I reduce our AGI by funding a traditional IRA for the $1,001 amount?

Thank you!

[rjs]

@joeygamb 

I think that will work, provided that one of you has compensation that allows you to make an IRA contribution for 2020, and that your IRA contribution is deductible. If either of you was covered by an employer retirement plan, or received Social Security benefits, you might not be able to deduct the full amount of your IRA contribution. The rules for deductible IRA contributions are very complicated. Try it out in TurboTax before you actually make the IRA contribution, and see if it works out as you expect.

Note that what you have to bring down below $150,000 is Modified AGI, which is different from the AGI on Form 1040 line 11. In TurboTax the Modified AGI for the unemployment exclusion is on line E of the Unemployment Compensation Exclusion Smart Worksheet, which is below line 21d of the Other Income Statement.

Also, I wouldn't cut it so close as to put yourself just $1 below the cutoff. Give yourself some margin for error in case something else changes that increases your AGI.

Finally, keep in mind that an IRA contribution for 2020 must be made by May 17.

[uqyuki]

@rjs

Hi there i have a question regarding this IRA deduction.

So I received Unemployment in 2020 for $6,600

my AGI without the Unemployment is $64,000 ($68,000 of total income - $4000 of IRA deduction) but after I enter my unemployment income now my AGI increased to $67,750 ($68,000 of total income - $250 of IRA deduction)

Per the IRS guidelines if my AGI less than $150K, the first $10,200 shouldnt be taxable, but how come my IRA deduction got reduced from $4000 to $250 once i added the Unemployment income?

[Critter-3]

Did you compare the returns before and after entering the unemployment to see what changed ... when you can determine that you will have your answer ... post back which form/line numbers you need help understanding.  

How do I preview my TurboTax Online return before filing?

You can view your entire return or just your 1040 form before you e-file:

1. Open or continue your return.
2. Select Tax Tools in the left menu (if you don't see this, select the menu icon in the upper-left corner).
3. With the Tax Tools menu open, you can then:
• Preview your entire return: Select Print Center and then Print, Save, or Preview This Year's Return (you may be asked to register or pay first).
• View only your 1040 form: Select Tools. Next, select View Tax Summary in the pop-up, then Preview my 1040 in the left menu.

[uqyuki]

Yes i did. If i didn't enter unemployment, my AGI (line 11 shown as $63,782 , on line 10a (this is from IRA deduction shown $250)

If i enter my unemployment, my AGI shown as $67,742, on line 10a (IRA deduction) shown as $4,210

So the descrapancies is on IRA deduction because my unemplyoment was added on my AGI resulting on reduction on my IRA deduction.

My unemployment compensation was $6,600 and since my AGI less than $150,000 the first $10,200 on unemployment should not be taxable right?

[rjs]

@uqyuki  See the answer to the separate question that you posted about the interaction of the unemployment exclusion and the IRA deduction. If you have any follow-up questions, please post them in that other thread, to keep all of the discussion in one place.

[Chrys1]

Incorrect. Those who so not fill out the social security form do not have a clue. Even the irs (legal department) stated to file an amendment because the 10,200 IS affecting our taxable amount paid and IS affecting EITC. Yes unemployment is not considered as earned income but it is being calculated as such in all tax software systems and it is not excluding the 10,200. 
anyone affected by this needs to file an amended return to not include the 10,200 and the IRS will adjust it accordingly. Do not assume the IRS will fix your return because they are not catching this huge error. This information came directly from the irs. Think about it…it’s excluded from taxes on one end (more common filers) but not the other meaning SSI (less common filers), so the irs didn’t think this completely through and therefore those who filed and were affected by paying higher taxes on SSI need to file an amended return. 
I’ve  seen what turbo tax is saying in the instructions they got from the irs but that is incorrect per the irs legal department.