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

[Erilflynn]

Msaaj

No NYS is NOT giving you the exclusion.  But they want Line 14 (UI) on IT203 to match the Federal amount that includes the exclusion.  The Form IT 558 is for adding back whatever exclusion you got on the Federal and that goes on Line 19A.  Think I got it right lol.

[sweetie41]

3/26 software update is STILL not calculating UCE correctly.

If you're filing MFJ and both have unemployment, TT is only deducting $10,200 instead of $20,400 for both taxpayers. (And...no....the $150,000 income limit is not in play here.)

[DoninGA]

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@sweetie41 wrote:

3/26 software update is STILL not calculating UCE correctly.

If you're filing MFJ and both have unemployment, TT is only deducting $10,200 instead of $20,400 for both taxpayers. (And...no....the $150,000 income limit is not in play here.)

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What program are you using?

I use the Premier desktop edition for Windows and the exclusion works for me when filing as MFJ.  Entered $10,000 unemployment for each spouse and on Schedule 1 Line 8 the UCE is -$20,000.

[sweetie41]

@DoninGA 

I am using TT Home and Business.

[DoninGA]

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@sweetie41 wrote:

@DoninGA 

I am using TT Home and Business.

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Have you verified that the UC was entered for each of you individually and not all for one person?

Enter unemployment compensation in the Search box located in the upper right of the program screen. Click on Jump to unemployment compensation

Go to Forms and look at Schedule 1 for total UC entered on Line 7 and the exclusion on Line 8

[sweetie41]

Thanks @DoninGA 

Double checked and corrected.

Appreciate the heads' up.

[RB m24]

Now that TurboTax has finally updated the desktop downloaded version to include the Unemployment Compensation Exclusion, it will automatically correct your Federal taxes. However, be sure to check your state regulations and double check to see what TurboTax transferred to your state return.

As of the latest posting on NC Department of Revenue (03/19/2021),  the UCE DOES NOT APPLY when calculating NC taxable income for tax year 2020. You must add back the UCE amount to the state return (Form D-400 Schedule S, Part A). Directions and worksheet for NC on how to do this can be found here:

https://files.nc.gov/ncdor/documents/files/2021-3-19-Impact-of-ARPA-on-2020-NC-Individual-Income-Tax...

This may change if the General Assembly decides to update the NC law to reference the new Internal Revenue Code. Until that happens, you must add the UCE back into your taxable income. If the General Assembly decides after you file your state taxes, an amended Form D-400 may be file to request a refund of any overpaid tax.

Each state is different, so double check before you file. 

And then if/when/how soon TurboTax will update the state forms, your guess is as good as mine.

[DoninGA]

@RB m24 See this TurboTax support FAQ for the status of the various states on how they tax unemployment compensation - https://ttlc.intuit.com/community/internal-revenue-service/help/how-is-my-state-taxing-unemployment-...

[Sue9]

I was happy that the desktop update was done but was saddened to see the real life issue of still owing the same state taxes I owed prior to the update. I had hoped it would lower the AGI all around. I read a lot about the issue and heard people would have different state tax scenarios, but now that I see it clearly it's disappointing. I did go to the state form and noticed they transfered the exemption information onto the form, but it definitely did not change the fact I owe state taxes.  

[JEFFCT]

Sometime on March 26th, TT updated its software (Home / Biz desktop ver) for the Unemployment Compensation Exclusion, however, the print outs do not include the new IRS Exclusion Worksheet.  Furthermore, the Taxable Social Security Worksheet, which uses the Modified Adjusted Gross Income is not taking into consideration the reduction in income due to the exclusion thereby taxing my Social Security for the full unemployment contrary to the act.  IRS instructions are very clear and TT is not following them, most likely by not following the instructions for the Unemployment Compensation Exclusion Worksheet.

[kategordon]

Thank you and what can we do about it. I believe you are correct and the same thing happened to me.

please write to me and maybe I can print out my tax return and follow what you are saying. 

I was taxed on my Social Security as well, due to the higher UI amount that apparently was NOT taken into account. I did see at one point where the exclusion was actually added to my gross income rather than subtracted from it. The TT people came into my computer on invite and kept insisting that the exclusion was happening automatically and no to pay attention to the fact that the amounts did not change on the pages proceeding the work sheet... I am sure that I ended up paying double what I owed in taxes and it really stinks but its done...I hope that IRS catches this! [email address removed]

[jtolpin1]

Some verbage from the IRS:

• Taxable social security benefits (Instructions for Form 1040 or 1040-SR, Social Security Benefits Worksheet)
• IRA deduction (Instructions for Form 1040 or 1040-SR, IRA Deduction Worksheet)
• Student loan interest deduction (Instructions for Form 1040 or 1040-SR, Student Loan Interest Deduction Worksheet)
• Nontaxable amount of Olympic or Paralympic medals and USOC prize money (Instructions for Form 1040 or 1040-SR, Schedule 1, line 😎
• The exclusion of interest from Series EE and I U.S. Savings Bonds issued after 1989 (Form 8815)
• The exclusion of employer-provided adoption benefits (Form 8839)
• Tuition and fees deduction (Form 8917)
• The deduction of up to $25,000 for active participation in a passive rental real estate activity (Form 8582)

I Believe, if I wanted to take the tuitition/fees deduction (say its under 150K, I forget now).... My AGI without unemployment was $135K, but with unemployment its $170K.

The AGI used for tuitition/fees is the full AGI (and not the reduced one so IM not eligible).

The reduced AGI is only being used for the unemployment $10,200 credit and not the listed above credits, I believe.

[alexander]

I'm happy with the update but something seems too good to be true.  My wife received a little over $4k in unemployment.  Before the TT update I owed $400 to the IRS, after the update it says I'm due a refund of well over $600.  That's over a $1,000 tax swing on $4k of income difference.  Does this make sense?

[ToddL99]

It could certainly make sense. If your income put you in the 24% tax bracket (MFJ - $171,051 to $326,600), a $4,000+ reduction in taxable income would be worth approximately $1000.

Also, a lower taxable income may have increased the value of a tax credit or deduction that had been limited by your income.

[alexander]

my AGI is $90k +/-