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

[macuser_22]

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@LEPGSO wrote:

This needs an timeline on when turbo tax will add it to their updates since the bill passed. It’s not in there yet as of 3/14/21. 

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You need to ask that to the IRS because TurboTax cannot do anything until the IRS issues instructions.   What TurboTax puts in the tax return the IRS computer must be programed to read it.    That takes form specifications form the IRS first.  These things take time.

[Critter-3]

@fbmcardl2 

In the past the IRS has made corrections to filed returns when tax law changes have happened or there were incorrect form instructions ... so some of us have speculated they may self correct this situation and recompute the returns without the need to amend for the unemployment issue.   All we can do is wait for the IRS to post directions on this matter.    

If you also have other items that need to be corrected then you must WAIT for the IRS to fully process your return before attempting the amendment process.  

[Fiscal]

@fbmcardl2 

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

https://www.irs.gov/faqs/irs-procedures/forms-publications/new-exclusion-of-up-to-10200-of-unemploym...

[fbmcardl2]

@Critter-3Ok I understand you're speculating but since you are, would you guess the IRS self correct recomputed return would add a retirement tax credit if the new unemployment exclusion makes the taxpayer now eligible for it and there is a retirement contribution (but no retirement credit) already shown on the filed return? Or are you saying they would fix the unemployment and then, again in my hypothetical, the individual taxpayer would still have to file an amended return after that to claim the retirement tax credit?

[Hal_Al]

@fbmcardl2 

Yep, we can only speculate.

That said, I think it would be unrealistic to expect the IRS to ADD the retirement Savers credit, or any other tax attribute.  If your original return already had a credit, the IRS might be able to adjust that credit.

My best guess is they'll give us the option of taking a simple refund (your marginal rate x $10,200) or filing a amended return for a more complex situation. 

[fbmcardl2]

@Hal_AlThanks but if your guess is correct, my opinion is that really doesn't help them or us if it's an "option." They would have to contact every taxpayer who's already filed and ask them whether the taxpayer would accept the option or not, then process that decision, and then still have to deal with many, many more (millions?) of amended returns because all of these income-related credits are interactive and taxpayers (who have been unemployed to begin with) may be losing out if they just take the "option". And then there's still the remaining issue of state returns. So I would be amending at the first opportunity (I know they have said don't file amended returns yet.)

[Critter-3]

Until the IRS posts official efiling directions  all this talk is moot. 

Of course I have seen in my own practice that the reduction of the taxable unemployment also corrected the repayment of the ACA PTC which no longer has to be repaid ... a twofer.   So patience will be needed until concrete instructions have been distributed.  Even my professional program is saying to wait until the programming is updated and the IRS is ready to accept returns with these changes on them.

[xmasbaby0]

@Critter-3

https://www.irs.gov/newsroom/irs-statement-american-rescue-plan-act-of-2021

[kaseylai]

https://www.irs.gov/faqs/irs-procedures/forms-publications/new-exclusion-of-up-to-10200-of-unemploym...

start...NOW!

[kaseylai]

https://www.irs.gov/faqs/irs-procedures/forms-publications/new-exclusion-of-up-to-10200-of-unemploym...

I already changed 5 returns that I had not submitted yet.

Schedule 1 - other income - line 8 "American Rescue Act"  ($10200)

[BPTAX1]

May I ask why you chose to write "American Rescue Act" instead of "UCE" that is shown in the IRS guidance?  Is there another post by the IRS that changed the one from 3/12/21? 

[kaseylai]

Ahhhhh - Didn't see that. Don't think it will matter.

I may write both going forward.

[Craig-o]

The IRS solution to this unemployment exclusion is both elegant and klugey.  Elegant in that no forms are changing; just the instructions for line 8 of Schedule 1.  Klugey in that they are forcing a negative number to the "Part 1.  Additional Income" section of the tax code (not very INTUITive).  I'd be curious if TT allows a negative number, assuming they ask "any other income not reported already?" (Since I filed already, I can't play with the what/ifs).

I my case, with the reduction in AGI, both the Saver's credit and PTC eliminate my tax bill and my refund goes  from $130 to $2,700.  I am very curious if they'll make those adjustments automatically.  This whole issue seems like unchartered territory for filers and the IRS.  I've been doing my own taxes for 47 years and this is new to me for sure (unemployment being the main difference).  I wonder if we have any ex-IRS employees or other tax experts out there that want to speculate.

[xmasbaby0]

Please read this very recent news from the IRS:

https://www.irs.gov/newsroom/irs-statement-american-rescue-plan-act-of-2021

[Craig-o]

@kaseylai  

I already changed 5 returns that I had not submitted yet.

Schedule 1 - other income - line 8 "American Rescue Act"  ($10200)

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Oh no, the instructions say to use "UCE", you'll be rejected.  (jk)