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

[macuser_22]

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@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.  

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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.

[Opus 17]

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@ld1098 wrote:

It already published the rules on how to claim it

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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. 

https://ttlc.intuit.com/community/tax-topics/help/how-do-i-claim-the-new-unemployment-benefits-in-tu...

[RyderS]

https://www.irs.gov/faqs/irs-procedures/forms-publications/new-exclusion-of-up-to-10200-of-unemploym...

IRS did, it's here.

[DoninGA]

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@RyderS wrote:

https://www.irs.gov/faqs/irs-procedures/forms-publications/new-exclusion-of-up-to-10200-of-unemploym...

IRS did, it's here.

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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

[DoninGA]

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@ld1098 wrote:

When will turbotax have the worksheet available? I can't find any information on it.  Am using the downloaded software this year.

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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

[Opus 17]

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@RyderS wrote:

https://www.irs.gov/faqs/irs-procedures/forms-publications/new-exclusion-of-up-to-10200-of-unemploym...

IRS did, it's here.

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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. 

https://ttlc.intuit.com/community/tax-topics/help/how-do-i-claim-the-new-unemployment-benefits-in-tu...

[Hal_Al]

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:

• Taxable Social Security
• Savings bond interest exclusion for education
• Employer-provided adoption benefits
• Deductible IRA contributions
• Student Loan Interest Deduction
• Tuition and Fees Deduction
• Passive activity loss limitation for rental real estate

If you're not sure that you are not affected by any of those, you should not use the workaround. 

[Honigtax]

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. 

[rmvtav]

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.

[LenaH]

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.

@Honigtax

@rmvtav

[Opus 17]

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@rmvtav wrote:

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.

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It appears that there is no reduction in the limit when filing MFS.  So possibly, filing MFS will exempt part of your UEC from tax when filing MFJ would not.   That will save you about $1300-$2600 depending on your other income.  However, filing MFS usually costs money, because many deductions and credits are disallowed or reduced (like IRA contributions) and the tax rates are slightly higher, so you will want to carefully test your tax returns both ways before you file. Remember that if either spouse itemizes their deductions on schedule A, both spouses must itemize, even if one spouse has zero deductions.  You are not allowed to stack all the deductions on one spouse and have the other spouse take the standard deduction.  

[Opus 17]

The law says 

‘‘(1) IN GENERAL.—In the case of any taxable year beginning

in 2020, if the adjusted gross income of the taxpayer for such

taxable year is less than $150,000, the gross income of such

taxpayer shall not include so much of the unemployment compensation

received by such taxpayer (or, in the case of a joint

return, received by each spouse) as does not exceed $10,200.

When filing MFJ, "taxpayer" means the entire tax return, when filing MFS, each spouse is a "taxpayer".  So the limit is applied per taxpayer and not per household, if you file MFS. 

[mcgeeclan]

That worked. Thanks for the tip.

The IRS instructions are totally screwed up.

[shaleeamadeo]

Turbo Tax should allow users to just simply add this new exclusion as a negative number to Schedule 1 Line 8.  

[macuser_22]

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@shaleeamadeo wrote:

Turbo Tax should allow users to just simply add this new exclusion as a negative number to Schedule 1 Line 8.  

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The IRS says to wait:

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