Unemployment Compensation Exclusion Worksheet – Schedule 1, Line 8

[WT090351]

When will Turbo Tax be updated for Schedule 1 Line 8 ? As of today 3/24/2021 it still has not been updated.

[gloriah5200]

Unfortunately, IRS is still making the determination and changes to the handling of the unemployment exemption in the tax code, in their systems, and for the software developers.

If you haven't filed you should hold off.  The software updates should be coming out soon.

The IRS is reviewing implementation plans for the newly enacted American Rescue Plan Act of 2021. Additional information about a new round of economic impact payments, including the unemployment benefit will be forthcoming.  A change came out on irs.gov yesterday.

The IRS strongly urges taxpayers not to file amended returns related to the new legislative provisions or take other unnecessary steps at this time. The IRS will provide taxpayers with additional guidance on those provisions that could affect their 2020 tax return, including the retroactive provision that makes the first $10,200 of 2020 unemployment benefits nontaxable.

TurboTax is developing the software required to process all of the new conditions.

[Kim-C]

The changes have already been determined.  My ProSeries Basic edition already has the changes applied, but turbotax still hasn't implemented the changes.

[KrisD15]

The changes are active in TurboTax Online:

[Kim-C]

I wonder why they have not updated all of the turbotax softwares?  

[MAXTAX86340]

Good question.....still waiting for the update.

[Tim1234]

If it's in the online version then WHY isn't it updated in the downloaded version which I pay GOOD MONEY FOR!!!!!!

[Irene2805]

We are working on incorporating the changes to TurboTax CD/DOWNLOAD as quickly as we can.  You can sign up here to receive an email notification when it has been completed. 

@Kim-C

@MAXTAX86340

@Tim1234

[Tim1234]

I already signed up for email notification.  Why is the online version updated?  Why are your COMPETITORS way ahead of TurboTax????

[MAXTAX86340]

So true! You would think that with the number of returns TurboTax does, that they would have software engineers getting the update much quicker.

[refereeken]

The IRS posted further guidance on March 24th about the treatment of UI income.  The important question was whether or not $150,000 income cutoff for excluding up to $10,200 of unemployment compensation should or should not include the UI received.  Their answer early in the process was that UI compensation would be included.  Yesterday, they announced that it wouldn't.  

https://www.irs.gov/forms-pubs/new-exclusion-of-up-to-10200-of-unemployment-compensation

Definitely an additional software change for all tax software developers.  We'll just have to be patient.

[JamesG1]

Unemployment income is reported by your state on IRS form 1099-G.  In TurboTax Online, enter as follows:

• Down the left side of the screen, click on Federal.
• Across the top of the screen, click on Wages & Income.
• Under Your income, scroll down to Unemployment.
• Click on Start/Revisit to the right of W-2.

 1040 Schedule 1 line 8 will generate a reversal when the unemployment update takes effect.  View this form under

Tax Tools / Tools / View Tax Summary / Preview my 1040.

This TurboTax Help allows you to sign up for updates from TurboTax about this feature of the tax code.  Nearly each state needs to respond to this mid-season change in the tax code.

[Steve1044]

Unfortunately this approach will not work since the IRS has now said "When figuring any of the following deductions or exclusions, include the full amount of your unemployment benefits reported on Schedule 1, line 7 (unreduced by any exclusion amount): taxable social security benefits, ...." Simply deducting the 10200 from UI will reduce the taxable social security benefit amount....

Just as a side note, just deducting the 10200 from UI also reduces Modified Adjusted Gross Income on Form 8962 calculating Premium Tax Credit. There are a LOT of flow through implications here.

[gloriah5200]

No, you are correct.  You must enter the full amount of unemployment income reported on the 1099-G and received on the return line 7 in the input of the 1099-G for unemployment income.  It flows from there to other calculations in the software and to the state returns.

[packerfn]

In filing out my taxes online I put the amount of unemployment compensation received and the taxable amount was calculated. I got more unemployment compensation than the exemption. I then put in my spouses unemployment compensation, she did not receive more than the exemption and the taxes owed increased. Why would taxes increase if the compensation is less than exclusion?