How is the new tax break for payments made to unemployment insurance calculated in TurboTax filing?

[JohnB5677]

If you've filed your return, do not do anything yet.  If you haven't filed you should file as usual, and include the full amount of the 1099-g..

The IRS is reviewing implementation plans for the newly enacted American Rescue Plan Act of 2021. Additional information about a new round of economic impact payments, including the unemployment benefit will be forthcoming.

The IRS strongly urges taxpayers not to file amended returns related to the new legislative provisions or take other unnecessary steps at this time. The IRS will provide taxpayers with additional guidance on those provisions that could affect their 2020 tax return, including the retroactive provision that makes the first $10,200 of 2020 unemployment benefits nontaxable.

For those who haven't filed yet, the IRS will provide a worksheet for paper filers and work with software industry to update current tax software so that taxpayers can determine how to report their unemployment income on their 2020 tax return.

TurboTax is developing the software required to process all of the new conditions.

[Cloud8350]

So,

The IRS has put out guidance IRS link but no worksheet, as referred to, to perform the calculation, as yet.  If you are able to unravel your eligibility and can determine the amount, by following the steps provided, there is a work around that provides the results as concluded in the guidance if done on a paper form.

On Schedule 1, line 7, your entire unemployment income is reflected as entered and on line 8 you will have the entry "UCE" in the description to the left and the eligible exclusion from unemployment income in the amount as a negative number, per the guidance for a paper form.

After entering your unemployment information as normally done.  Under Personal Income topics at the bottom there is Miscellaneous Income.  Select this and proceed to Other Reportable Income, again at the bottom and select.  Open an income item and there will be an entry box for description, enter "UCE".  Below there will be an entry box for taxpayer(s), enter the appropriate amount determined from the IRS guidance for the respective taxpayer(s), as a NEGATIVE number. 

The outcome will be the same as described in the IRS guidance for a paper return as I described above.  Hope this was helpful, I'm not a professional, so would suggest verifying with 2nd opinion if you aren't comfortable with solution.

[PattiF]

If you have already filed your taxes:

As part of the recently passed American Rescue Plan, the first $10,200 worth of unemployment payments are now tax-free for households with annual incomes less than $150,000. This expanded tax relief begins this year, starting for taxpayers filing returns after January 1, 2020.  The IRS will provide additional guidance about what you need to do to take advantage of this relief if you already filed your 2020 tax return. 

If you’d like to be updated when the information becomes available, please sign up here.

If you have not yet filed your taxes:

As part of the recently passed American Rescue Plan, the first $10,200 worth of unemployment payments are now tax-free for households with annual incomes less than $150,000. This expanded tax relief begins this year, starting for taxpayers filing returns after January 1, 2020.  Once the IRS provides additional guidance, TurboTax will be updated to reflect these new tax laws relating to unemployment. 

If you haven’t filed your 2020 taxes yet and would like to receive progress status updates, please sign up here.