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

[macuser_22]

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@Butno wrote:

So there is no printable workshee?

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It just became law a few days ago - these things take time to develop.

[tfritz1]

All of this due to one Senator.  Would have been easier to keep it as $400 for all. 

[Robyn1114]

The printable worksheet is still the normal schedule 1, the irs link just tells you how to include the10200 unemployment tax credit.

[macuser_22]

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@Robyn1114 wrote:

The printable worksheet is still the normal schedule 1, the irs link just tells you how to include the10200 unemployment tax credit.

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There are still several issues for the IRS to write rules for.   For example, just entering it in schedule 1 can change the amount of EIC a tax payee can get and the amount that can be contributed to an IRA.   When Congress rushed this bill, they did not address how to handle the unintended consequences of the change that now the IRS must write rules and regulations to implement the change.

[Laffusrcu]

We still got to wait ladies and gents until they update the forms in software . And the ones that filled already DO NOT AMEND yet till IRS tells us otherwise!

[CrisDean]

I see a lot of talk about work arounds and the IRS issuing guidance, etc...what I am not seeing is any communication from TurboTax about when they will have the website/software updated so we can file!  April 15 is less than a month away!  We cannot afford to wait much longer!  The thought of having to file just to turn around and amend is really a horrible option!!!  Fix this TurboTax!  Why is this taking so long?  Why has there been NO communication.

[DoninGA]

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@CrisDean wrote:

I see a lot of talk about work arounds and the IRS issuing guidance, etc...what I am not seeing is any communication from TurboTax about when they will have the website/software updated so we can file!  April 15 is less than a month away!  We cannot afford to wait much longer!  The thought of having to file just to turn around and amend is really a horrible option!!!  Fix this TurboTax!  Why is this taking so long?  Why has there been NO communication.

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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

[jeshu]

I have the same issue, without my wife's unemployment my AGI would be less than 150K.

[Rbjcc24]

Looking at the IRS guidance it looks like they are using the term modified adjusted gross income despite the bill simply stating adjusted gross income. This would imply certain above-the-line deductions not being allowed to calculate your AGI for this exemption. That being said, the specific instructions seem to allow for the traditional above-the-line deductions (i.e. student loan interest) to your gross income when making a determination if you are below the $150,000 cap. Am I reading this right?

[macuser_22]

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@Rbjcc24 wrote:

Looking at the IRS guidance it looks like they are using the term modified adjusted gross income despite the bill simply stating adjusted gross income. This would imply certain above-the-line deductions not being allowed to calculate your AGI for this exemption. That being said, the specific instructions seem to allow for the traditional above-the-line deductions (i.e. student loan interest) to your gross income when making a determination if you are below the $150,000 cap. Am I reading this right?

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There are several issues the IRS must address before this can be implemented that Congress did not address.    Simply subtracting the amount on schedule 1 has other consequences - it can change the amount of EIC, the amount of allowable IRA contributions and probably several other things.    

For example: is EIC to be calculated before or after applying the exclusion?    If before, then that will require extensive changes to the EIC forms and software as well.   Same for IRA's and probably several others.

As of now the IRS has not given any guidance on the other unintended consequences.

This is not as simple as it sounds.

(The last time Congress made a retroactive change it took several months to implement,  requiring extensions to be filed.)

[cloudywithachance]

@Rbjcc24 Since MAGI is adding certain deductions/exclusions back to AGI, isn't MAGI always higher than, or at minimum equal to, AGI?  Seems easiest to see what a taxpayer's AGI is, without factoring in the $10.2k UI exclusion, and if it's $150k or over, then the taxpayer is not eligible.

Yes, modifying Schedule 1 modifies Form 1040 Line 8, so if you're eligible to exclude $10.2k of UI from tax, then your AGI will be reduced further after applying the instructions, but if your AGI is $150k or over to begin with, you wouldn't be able to apply the instructions in the first place.

[Rbjcc24]

Yes I agree with what you are saying about the MAGI v. AGI but here’s the thing. MAGI often requires you to add back in certain deductions like student loan interest. What if student loan interest is the difference between being over or under $150k? Typically MAGI adds it back in but the instructions appear to allow it to be deducted in terms of coming to an AGI for the unemployment compensation exemption. Just making sure I’m understanding it properly. 

[Cloud8350]

Suggest:

IRS guidance is available online to calculate eligibility but cannot find actual worksheet.  However, following instructions in guidance should provide necessary information.  Assume worksheet is forthcoming.

Meanwhile this was my fix,

If eligible, the amount to be reduced should result as an entry on Schedule 1, line 8, with a notation to the left of "UCE" Unemployment Compensation Exclusion.

Result can be generated by entering in miscellaneous income under other reportable income entry at the bottom, if eligible then enter the notation "UCE"  as the description entry and the amount as a negative entry under the appropriate individual name.

This will result in the appropriate entry in Schedule 1 under line 8 with the appropriate Line 7 entry above to adjust taxable income.

[cloudywithachance]

@Rbjcc24 Got it, you make a good point! It's weird that the bill itself doesn't say "modified" but the IRS guidance does.  The bill does have this section:

“(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.”.

And then a bunch of conforming amendments mentioning each section of the tax code.  I'm sure that's the complicated stuff TurboTax has to incorporate into their software, but I wonder if that's what's the "modified" in the IRS guidance is referring to.

[Chibal03]

If we make under $150,000 and received unemployment under $10,200. Can we just omit putting the information in? It’s not going to count anyways, so what’s the point of waiting?