New Exclusion of up to $10,200 of Unemployment Compensation

[claudia174]

You are pointing out for "those" tax payers who already "filed" taxes. 

This blog post concerning the waive $10,200 is for those who "did not" file their income taxes. 

[MRoles]

Not everyone will have (10,200.00) on line 8 of Schedule 1....you must complete the Unemployment Compensation Exclusion Worksheet to compute what is put on line 8 of Schedule 1, if anything.

[MRoles]

March 25th ***UPDATE****  This was brought to my attention!

  While this will exclude the unemployment from the AGI,  the Rescue Act specified 8 other tax and credit calculations that depend on the AGI were NOT to be affected by the Act.

In other words, simply entering this way can make 8 other calculations inaccurate.     That is why it must be done in the software so those other calculations will use the AGI without regard to the change of the Unemployment Compensation Exclusion.

(The IRS worksheet was for paper returns and entering the change in a piece of paper will not change other calculations, but entering as misc income will change anything that depends on the AGI.)

 The following 8 areas are NOT to exclude the Unemployment Income from the AGI and therefore, the below direct input instructions into the TT software is NOT advised:

Social Security

Savings Bonds

Adoption

Retirement Savings

Interest Education Loans

Tuition Expenses

Passive Activity Losses & credit limits

Certain State Returns

Yes, but depending on the outcome of the Federal Exclusion of Unemployment, some tax payers may still need to wait for the forms being produced by their State.  In Maryland, the Federal AGI is carried over to the State return and the need to wait for the new Form 502LU may not be needed if there is no State Exclusion left to take.

[claudia174]

That is correct - but if you have premier TT software - the software on Sched 1 is not allowing us to do it. Ive called twice already and the support saw their TT is not allowing to do it- Even when you run the Smart Check. TT needs to update their software . 

[MRoles]

March 25th ***UPDATE****  This was brought to my attention!

  While this will exclude the unemployment from the AGI,  the Rescue Act specified 8 other tax and credit calculations that depend on the AGI were NOT to be affected by the Act.

In other words, simply entering this way can make 8 other calculations inaccurate.     That is why it must be done in the software so those other calculations will use the AGI without regard to the change of the Unemployment Compensation Exclusion.

(The IRS worksheet was for paper returns and entering the change in a piece of paper will not change other calculations, but entering as misc income will change anything that depends on the AGI.)

 The following 8 areas are NOT to exclude the Unemployment Income from the AGI and therefore, the below direct input instructions into the TT software is NOT advised:

Social Security

Savings Bonds

Adoption

Retirement Savings

Interest Education Loans

Tuition Expenses

Passive Activity Losses & credit limits

Certain State Returns

[MRoles]

Where is the thumbs down?????????????????????????????????

[msaaj]

I Googled around about the state taxes. Taxact has a page with all the states listed with what they know: https://www.taxact.com/support/[social security number removed]/american-rescue-plan-unemployment-ex... 

For NY it says the following:

"New York does not currently conform to the federal exclusion, but has not released guidance on adding back the exclusion. The TaxAct New York program currently allows the unemployment exclusion, but you may need to amend your return if the state decides not to conform."

[gloriah5200]

Regarding states handling of unemployment payments:

Please refer to the following link for additional information:
States handling of federal unemployment income

IRS is still making changes to their system for tax law changes found in the American Rescue Plan.  After they get their changes into their system, then they have to get together with the software developers with the information for their software changes.  Then it takes time to get them into all the versions of the software.

IRS just released a new message stating:

If you have already filed your 2020 Form 1040 or 1040-SR, there is no need to file an amended return (Form 1040-X) to figure the amount of unemployment compensation to exclude. The IRS will refigure your taxes using the excluded unemployment compensation amount and adjust your account accordingly. The IRS will send any refund amount directly to you.

For additional information, refer to the following link:

IRS - regarding unemployment changes for early filers

Some of the TurboTax versions have been updated with the change, such as TurboTax Online.  Others, such as desktop, have not yet been updated but are in the process.  Desktop if scheduled to release a software update on March 26. If you have Premier Desktop version, hopefully it will be updated on 03/26/2021.
 

[Edited 03/23/2021|5:20 pm pst]

[MRoles]

Your link to Taxact is no longer available

[claudia174]

I just followed your instruction and it works! Thank you! 

Readers here:  Pls Follow the instruction provided  - it works!  Thank you!

[MRoles]

March 25th ***UPDATE****  This was brought to my attention!

  While this will exclude the unemployment from the AGI,  the Rescue Act specified 8 other tax and credit calculations that depend on the AGI were NOT to be affected by the Act.

In other words, simply entering this way can make 8 other calculations inaccurate.     That is why it must be done in the software so those other calculations will use the AGI without regard to the change of the Unemployment Compensation Exclusion.

(The IRS worksheet was for paper returns and entering the change in a piece of paper will not change other calculations, but entering as misc income will change anything that depends on the AGI.)

Per the Act (and 1-8 below are sections NOT to be changed by the exclusion)

“(2) APPLICATION.—For purposes of paragraph (1), the adjusted gross income of the taxpayer shall be determined—

“(A) after application of sections 86, 135, 137, 219, 221, 222, and 469, and

“(B) without regard to this section.”.

(b) Conforming amendments.—

(1) Section 74(d)(2)(B) of the Internal Revenue Code of 1986 is amended by inserting “85(c),” before “86”.

(2) Section 86(b)(2)(A) of such Code is amended by inserting “85(c),” before “135”.

(3) Section 135(c)(4)(A) of such Code is amended by inserting “85(c),” before “137”.

(4) Section 137(b)(3)(A) of such Code is amended by inserting “85(c)” before “221”.

(5) Section 219(g)(3)(A)(ii) of such Code is amended by inserting “85(c),” before “135”.

(6) Section 221(b)(2)(C)(i) of such Code is amended by inserting “85(c)” before “911”.

(7) Section 222(b)(2)(C)(i) of such Code, as in effect before date of enactment of the Taxpayer Certainty and Disaster Tax Relief Act of 2020, is amended by inserting “85(c)” before “911”.

(8) Section 469(i)(3)(E)(ii) of such Code is amended by striking “135 and 137” and inserting “85(c), 135, and 137”.

 The following 8 areas are NOT to exclude the Unemployment Income from the AGI and therefore,  direct input instructions into the TT software is NOT advised:

Social Security

Savings Bonds

Adoption

Retirement Savings

Interest Education Loans

Tuition Expenses

Passive Activity Losses & credit limits

Certain State Returns

[helen_feddema]

I will be calling the NYS Tax Dept. tomorrow, to see what they have to say.  In addition to paying tax for 2020 when I usually owe nothing, I also scheduled quarterly auto-payments, which I will have to cancel.

[macuser_22]

The update is scheduled for 3/25.

[mgmclain]

This exclusion is not updated on Turbo tax yet. The news said that Turbo tax has updated this, but it is not working.  Also, I noticed that the $300 above the line deduction for charitable donations is not working either 

[Anonymous]

Boycott TT

no help for those affected by the pandemic