Yes, you are correct. The way to exclude the Unemployment Compensation income is on a new Unemployment compensation Exclusion Worksheet. The IRS is working with software companies to implement this worksheet as soon as possible.
To read more about eligibility and this worksheet see: IRS: New Exclusion of up to $10,200 of Unemployment Compensation
How will we know when this is ready to go on TurboTax? April 15 is racing at us fast and we need to get our taxes filed ASAP!
There is currently no information on when the IRS will issue instructions on exempting 2020 unemployment compensation from federal tax.
As soon as the IRS issues instructions on how to report newly-exempt 2020 unemployment payments, TurboTax will make the necessary updates to its programs. Until those changes are made, you have two options:
1. File now and amend your return later, after updates have been made.
2. File after IRS instructions are released and the programs have been updated.
From How will the third stimulus impact me?:
"We’re working hard to keep TurboTax up to date with the latest tax changes based on instructions we receive from the IRS. Check back soon to add your unemployment income and file your return."
The IRS has already provided guidance. How will we know when Turbo Tax is updated to reflect it?
It is still being determined at this point by the IRS. According to the newly passed legislation, the first $10,200 on unemployment earned in 2020 would be considered nontaxable if your household income is less than $150,000.
IRS Statement on American Rescue Plan
Once the IRS issues some guidance, TurboTax will be able to update their software accordingly.
The IRS HAS provided the guidance as noted in the link I sent above. WHEN WILL TURBO TAX BE UPDATED TO REFLECT IT AND HOW WILL WE KNOW IT'S BEEN DONE SO WE DON'T HAVE TO KEEP CHECKING BACK???
DO NOT : File now and amend your return later...the IRS already has 5 million pieces of unopened mail, and your return may not be processed any time soon. I believe the IRS put that in their original directive.
I use the Lacerte (professional version of turbotax) at work and an email we got yesterday indicated that a software update should be implemented by 3/15/21. Even if it's a little later, I would suggest waiting as long as possible....
"Just hang on loosely.....but don't let go."
Will the software update be available to customers that purchased Turbo Tax Deluxe? When is the projected date of the software update that allows for the $10,200.00 exclusion of Unemployment benefits for 2020?
With this new law, if your household income is less than $150,000, the first $10,200 of unemployment will be tax-free, but any amount you receive above that will be taxed. We must wait on the IRS for the way they want this to be handled. Please continue to use the links below to know the most up to date information. If you already filed your tax return do NOT amend at this time per IRS.
When will turbotax have the worksheet available? I can't find any information on it. Am using the downloaded software this year.
The $10,200 unemployment retroactive to 2020 was just signed into law. Now the IRS is responsible for writing regulations and rules for claiming it.
Software changes do not happen overnight - it takes time to test, package as an update and fit into the existing update schedule. Probably a few weeks.
It also must be submitted to the IRS for approval before it can be released.
https://www.irs.gov/faqs/irs-procedures/forms-publications/new-exclusion-of-up-to-10200-of-unemployment-compensation
The appropriate link doesn't mention when the worksheet will be available to Turbotax. The IRS has a written directive on how to complete the worksheet.
@ld1098 wrote:
It already published the rules on how to claim it
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
@ld1098 wrote:
The appropriate link doesn't mention when the worksheet will be available to Turbotax. The IRS has a written directive on how to complete the worksheet.
There is much more to it than that. Simply entering as the IRS states in the link can have other unintended consequences since that will affect the AGI and that can make other calculations for other tax and credits incorrect.
The IRS has yet to offer guidance for e-file providers. What the IRS published is for hand filled paper returns. Electronic returns are totally different and require IRS issued e-file specifications that both the e-file providers system and the IRS system are programed for so they can talk to each other. That takes a lot of development by the IRS to supply the e-file specifications for the change. e-file does not send forms it sends encrypted data.
@ld1098 wrote:
It already published the rules on how to claim it
It will take a further amount of time for the change to be programmed into Turbotax. The change also has to be tested and approved by the IRS (all software products must be approved by the IRS before they are allowed to submit to the IRS system.)
Since this is only a change to the internal program worksheets and not one of the actual tax return forms, I expect the change to be fairly quick, unfortunately, "fairly quick" can still mean 1-2 weeks.
If you go to this page, you can sign up to receive an e-mail alert when Turbotax is updated.
IRS did, it's here.
@RyderS wrote:
IRS did, it's here.
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
@ld1098 wrote:
When will turbotax have the worksheet available? I can't find any information on it. Am using the downloaded software this year.
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
@RyderS wrote:
IRS did, it's here.
You aren't reading the posts. It will take some extra time for the changes to be programed into Turbotax, tested, and accepted by the IRS. (The IRS has to approve all software companies in advance before they can connect to the IRS.) You can go here to sign up for an email update when Turbotax is ready.
But, the IRS has issued instructions, so TT does know what to do, So, far we haven't heard when. There do not appear to be any form changes needed.
Any workaround involves some risk of error That said, if a user really can't wait, this work arounds appears to put it in the right place, with the right wording:
In TurboTax (TT), enter at:
- Federal Taxes tab (Personal in Home & Business)
Wages & Income
Scroll down to:
-Less Common Income
-Misc Income, 1099-A, 1099-C
- On the next screen, choose – Other reportable income
- On the next screen, click yes
- On the next screen, you'll get blanks to enter the amount and a description. For the amount enter with a minus sign: -10200. For description type UCE(10200). It will go on line 8 of Schedule 1 as a deduction (-).
That assumes you meet the income restrictions and you’re entitled to the full $10,200 and your spouse doesn’t also have unemployment. See, the IRS worksheet at https://www.irs.gov/faqs/irs-procedures/forms-publications/new-exclusion-of-up-to-10200-of-unemploym... for how to calculate the correct amount to enter.
I’ve heard that the American Rescue Plan Act specifically says that the excluded unemployment income is NOT to be subtracted in calculating the following:
If you're not sure that you are not affected by any of those, you should not use the workaround.
You can do on turbo now only on the federal by putting in a -10200 on other income per the IRS web site.
However, it will flow through to a state that may or may not accept it. So we have to wait for the states to fix their forms. If the state that originally charged unemployment accepts it the -10200 will flow in and your state
return will be good. There is no way to fix it now if the state does not accept it unless you wait or do it and get a state letter to fix it.
For clarification, is it household income of under $150,000 or personal income under $150,000? My husband makes way more money than me so I wonder if I should file separately in order to be able to qualify for this. We already took a huge hit on this last stimulus because of his income.
No. It is best to wait until TurboTax software is updated before attempting a deduction on that Line 8 of Schedule 1. Otherwise, it could delay refunds significantly.
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.
If you’d like to be updated when the information becomes available, please sign up here.