When will the $10,200 of unemployment tax exemption go into effect?

[xmasbaby0]

We will find that out IF the proposed tax law change is passed in the Senate and signed into law.  So far, it is still part of the things the Senate is debating in regard to the 3rd stimulus bill.

[DoninGA]

Until the President signs the legislation there has been no changes to the tax code.

The legislation only would affect a federal tax return.  The various states that tax unemployment compensation would have to make changes to their own tax codes and only if they so desire.

TurboTax nor any other tax preparation software company can do anything until After the IRS has written the rules and regulations after passage of legislation which changes the tax code.

[avmess08]

So, as I understand it -- my options are to do my taxes like I would and then have to file an amended return, or wait until this gets finalized?

[xmasbaby0]

It will probably have no effect on 2020 returns.  More likely it will affect 2021 returns filed next year.

[fanfare]

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[mccueeb]

My understanding is that $10,200 of unemployment compensation received in 2020 will be exempt from federal taxes.

[xmasbaby0]

That tax law has not yet passed in the House or been signed into law by the President.   When that happens then the IRS will need to change the tax forms, the programmers have to change the software, and then the IRS has to approve of their software.   That will take time---we do not know yet when all of those changes will be accomplished.  As soon as more is known, TurboTax will provide information.

[DeanLefebvre1]

Once the tax law is changed which should be immediately after the President signs the bill will TURBOTAX offer the exemption to US taxpayers who will file by April 15, 2022?

I would hope so!

[DoninGA]

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@DeanLefebvre1 wrote:

Once the tax law is changed which should be immediately after the President signs the bill will TURBOTAX offer the exemption to US taxpayers who will file by April 15, 2022?

I would hope so!

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After the legislation has passed Congress and after the President has signed the legislation and after the IRS has written the rules, regulations and procedures.  And after the IRS has changed any forms or schedules to accept the tax code changes.  And after the IRS has approved the changes in the TurboTax program that apply to the tax code changes, then it will be available for the users of the tax preparation software.

This can take anywhere from several weeks to several months before it becomes available.

[Lordpo69]

I just filed with turbotax on the 3rd of March . Will I be able to get the 781.00 I filed for unemployment back?  Once this is signed into law ..

Am I going too have to amend the return or what !?!

[Critter-3]

@Lordpo69 

Until the law is signed into law no one knows exactly what is being changed and if it will be retroactive to 2020 so you and everyone else will have to wait and see.  

[gmoney3]

For example Joes 1099G says $15,200 in unemployment income for 2020
Joe beleives the exemption passed into law will be for $10,200 for 2020
Joe files his return today, and says his 1099G income is $5,000

What are the consequences for Joe?

[Critter-3]

#1  Joe should NOT  adjust the return until the IRS has made the changes in their system   AND the program has also been updated  so his return is not held up in processing for months.  Chances are this will be a MARGINAL entry on the Schedule 1 line 7 which the program doesn't have yet and the IRS is not ready to accept yet.  If Joe does what he plans to do he will be opening up a can of worms for sure.  Not a good choice at all.  

[DoninGA]

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@gmoney3 wrote:

For example Joes 1099G says $15,200 in unemployment income for 2020
Joe beleives the exemption passed into law will be for $10,200 for 2020
Joe files his return today, and says his 1099G income is $5,000

What are the consequences for Joe?

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Joe would be filing an incorrect (possibly fraudulent) federal tax return because none of the 2020 tax code has been changed by the US Treasury or the IRS to codify the legislation, which still has not been signed by the President.