I am confused how do I apply the IRS 10,200 Unemployment Tax Exclusion. There are instructions on the IRS website but I don't get it.

[stibnitewolf]

These are the instructions on the IRS website

1. Enter the total of lines 1 through 7 of Form 1040 and Schedule 1, lines 1 through 7. Include the full amount of unemployment compensation you received in 2020 on Schedule 1, line 7.

2. Use the line 8 instructions to determine the amount to include on Schedule 1, line 8 and enter here. Do not reduce this amount by the amount of unemployment compensation you may be able to exclude.

3. Add lines 1 and 2.

4. Enter the total of line 10b of Form 1040 and Schedule 1, lines 10 through 21.

5. Subtract line 4 from line 3. This is your modified adjusted gross income.

6. Is the amount on line 5 $150,000 or more?
o [ ]Yes. Stop You can’t exclude any of your employment compensation
o [ ]No. Go to line 7

7. Enter the amount of unemployment compensation paid to you in 2020. Don’t enter more than $10,200

8. If married filing jointly, enter the amount of unemployment compensation paid to your spouse in 2020. Don’t enter more than $10,200

9. Add lines 7 and 8 and enter the amount here. This is the amount of unemployment compensation excluded from your income.

10. Subtract line 9 from line 2 and enter the amount on Schedule 1, line 8. If the result is less than zero, enter it in parentheses. On the dotted line next to Schedule 1, line 8, enter “UCE” and show the amount of unemployment compensation exclusion in parentheses on the dotted line. Complete the rest of Schedule 1 and Form 1040, 1040-SR, or 1040-NR.

[JohnB5677]

What you have described is a modification to Schedule 1.  Since this is a new law, TurboTax has not yet completed this modification (it is in process).

If you have prepared your taxes you should not do an amendment.  You can still file your taxes as they are.  The IRS will make the appropriate adjustment for taxes that were already filed, or you can wait for the software to be updated.  At this point we do not have an exact date.

[theoriginalglamsquad]

What happens if taxes were filed prior to the bill signing. Will TurboTax reach out to its customers to file an amendment? During review will the IRS automatically make the adjustments? 

[DoninGA]

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@theoriginalglamsquad wrote:

What happens if taxes were filed prior to the bill signing. Will TurboTax reach out to its customers to file an amendment? During review will the IRS automatically make the adjustments? 

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See this TurboTax support FAQ for information for the unemployment compensation exclusion - https://ttlc.intuit.com/community/tax-topics/help/how-do-i-claim-the-new-unemployment-benefits-in-tu...

Also see this IRS statement - https://www.irs.gov/newsroom/irs-statement-american-rescue-plan-act-of-2021