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

[macuser_22]

The $10,200 unemployment retroactive to 2020 was just signed into law. Now the IRS is responsible for writing regulations and rules for claiming it. Once the rules are written then if new forms will be needed the IRS must develop those. Then get the form specifications to software providers to develop their software. The IRS then must conduct tests with the software providers to be sure it is all comparable.

That process can take several weeks to several months. Do not look for anything soon.

(As a reference, the COVID CARES Act was passed in March of 2020 and the IRS released the forms to report it in February 2021 - 11 months later.)

[irunlikeataxgurl]

@sbrown12123

Your question has already been answered multiple times in this thread and the reasons have been given for why it takes so long for a gigantic bureaucracy to implement change.

[Kidtageous]

So now that the legislation has officially made the first $10,200 of unemployment in 2020 tax exempt, do we just subtract the $10,200 from our unemployment total or do we have to wait for turbo tax to update the app and apply a code?

[macuser_22]

Been answered above in this thread.

[Anonymous]

Not correct. It actually ONLY affects 2020 Unemployment benefits.

[slbg221]

I was wondering is that 10,200 tax exemption is it on the TOTAL benefit received or just on the  UNEMPLOYEMENT total not total with the extra monies received for the pandemic relief

[Craig-o]

@irunlikeataxgurl 

I’m not so sure. Nothing in the link you sent mentions “regardless if it’s taxable or not”. Income for Marketplace purposes start from AGI.  If you agree that AGI will be reduced by the $10,200 (do you agree?) on tax form 1040, I’m saying the IRS would have to change the PTC instructions to include it back into MAGI. That is the huge question.

Having this tax reduction affect (effect?) AGI will have an effect (affect?) on all tax credit calculations.  In my case, the Saver’s Credit will increase from $200 to $1000 so my tax bill will be zero.  Woo Hoo!

[rondi93]

Ok, it is now law.  So when can we file using this exemption?

[DoninGA]

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@rondi93 wrote:

Ok, it is now law.  So when can we file using this exemption?

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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.

See this TurboTax support FAQ for information on the American Rescue Plan - https://ttlc.intuit.com/community/tax-topics/help/how-will-the-stimulus-package-impact-me/00/1393859

[GeorgeHarrisonTaxMan]

So, President Biden just signed the Stimulus bill on Thursday, March 11th.   Now when will the $10,200 of unemployment tax exemption go into effect and reflex on my Turbo Tax Premier software?

[DoninGA]

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@GeorgeHarrisonTaxMan wrote:

So, President Biden just signed the Stimulus bill on Thursday, March 11th.   Now when will the $10,200 of unemployment tax exemption go into effect and reflex on my Turbo Tax Premier software?

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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.

See this TurboTax support FAQ for information on the American Rescue Plan - https://ttlc.intuit.com/community/tax-topics/help/how-will-the-stimulus-package-impact-me/00/1393859

[Craig-o]

It’s so much fun to speculate.  Will the IRS go simple or difficult?

Option A (difficult and time consuming):  The IRS could choose to effect change to AGI with the unemployment income deduction.  This would cause all other deductions, forms, instructions, and calculations that use AGI as a base, to be affected as well.  

Option B (simple and straightforward):  The IRS could simply add a new line to the Form1040 right after the standard/itemized deduction line, “unemployment compensation deduction” and be done.  This change would be in line with the intent of simply reducing the tax burden on the unemployed without opening the AGI can of worms.

If they had months to implement this change and thought it would become a permanent adjustment to taxes, they would probably go with Option A.  Since SO many unemployed have already filed that are affected by this change in tax code, I think they will go with Option B.

Has our government ever opted for simple over complex?  This may be the first time.  We will find out soon enough.

[GeorgeHarrisonTaxMan]

So how am I supposed to finish my taxes if the $10,200 unemployment tax exemption might take months to be added to the Turbo Tax software?   It's March 12th today, and my taxes are due on April 15th.  If it takes months for this changed to be reflexed in the Turbo Software....what am I going to do.   I received over $10,200 in unemployment compensation, so this affects me greatly!

[lainie13]

Now that the bill has passed and its law, when can we amend our 2020 returns to get the $10,200 unemployment credit? When will turbo tax have that updated in their system so that this edit to our amended returns can happen seamlessly? 

[DoninGA]

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@lainie13 wrote:

Now that the bill has passed and its law, when can we amend our 2020 returns to get the $10,200 unemployment credit? When will turbo tax have that updated in their system so that this edit to our amended returns can happen seamlessly? 

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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.

See this TurboTax support FAQ for information on the American Rescue Plan - https://ttlc.intuit.com/community/tax-topics/help/how-will-the-stimulus-package-impact-me/00/1393859