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Critter-3
Level 15

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

When the IRS makes the correction on an already filed and accepted return  then the extra refund will either be added to the refund you have not yet gotten or  sent separately.  Expect a letter from the IRS explaining the difference.

 

If you had a balance due on the original return :

 

And you have NOT paid it yet then you only need to pay the adjusted balance due by 5/17/21.

 But if you HAVE paid the original balance due then the IRS will send you the difference in the bottom line back.   

 

Either way do NOT NOT NOT mail in an amended return ... the IRS will correct this issue automatically. 

 

Systems_Guy
Level 1

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

I can confirm the update came in for TT Deluxe.  Both Federal and State updated.

 

Now Schedule 1 line 9 has UCE and -16416.  This covers my wife and myself.  For us the best part of the update is that I can fiddle with how much we want to pay back on our COVID withdraw from IRA.  Might as well avoid as much tax as we can paying back what we can to ourselves.  

 

City of Pontiac still throwing error over IRA Distribution and that amount vs. Income.  will open case on that.

fbmcardl2
Level 4

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

@Critter-3  Try reading my comment again. You obviously missed the fact that for those who previously filed there are situations that will require amendment even after IRS modifies the return.

macuser_22
Level 15

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


@fbmcardl2 wrote:

@Critter-3  Try reading my comment again. You obviously missed the fact that for those who previously filed there are situations that will require amendment even after IRS modifies the return.


The "Rescue Act" specifically says that many retirement calculations are to be done before applying the exclusion to the AGI.   The Act lists 7 different calculations that are NOT to be affected by the new AGI but must use the original AGI before the exclusion.    

 

That is why a software update was needed and not just a simply subtraction, because just subtracting it would make 7 other calculations inaccurate.

 

It is not clear at this point if the savers credit is affected of not.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
fbmcardl2
Level 4

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

@macuser_22"That is why a software update was needed and not just a simply subtraction, because just subtracting it would make 7 other calculations inaccurate. It is not clear at this point if the savers credit is affected of not."

 

Excuse me, but if the software update was made, then TT should absolutely know now when whether the savers credit is affected or not.

fbmcardl2
Level 4

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

@macuser22

 

Furthermore, here are the different code sections you refer to and none of them relates to code section 25 (which is the retirement savers credit):

 

From Section 9402 of the Rescue Act that suspends tax on the portion of unemployment income:

 

“(2) APPLICATION.—For purposes of paragraph (1), the adjusted gross income of the taxpayer shall be determined—

“(A) after application of sections 86, 135, 137, 219, 221, 222, and 469,

macuser_22
Level 15

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


@fbmcardl2 wrote:

@macuser22

 

Furthermore, here are the different code sections you refer to and none of them relates to code section 25 (which is the retirement savers credit):

 

From Section 9402 of the Rescue Act that suspends tax on the portion of unemployment income:

 

“(2) APPLICATION.—For purposes of paragraph (1), the adjusted gross income of the taxpayer shall be determined—

“(A) after application of sections 86, 135, 137, 219, 221, 222, and 469,


The way it is currently implemented in TurboTax the AGI for determine the savers credit WILL change the credit.    What I was referring  to is it is not clear at this time if you will need to amend or the IRS will make the adjustment for you.    The IRS is currently saying do not amend for any unemployment related changes until they issue further guidance. 

 

The IRS is WAY behind and backlogged and amended returns are currently taking 6 months to process and the IRS does not want any more amended returns if it can be avoided.

 

Sorry if I was not clear.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
fbmcardl2
Level 4

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

@macuser_22  Thank you for the clarification and I agree one has to wait before filing an amended return. But I reiterate that if no savers credit were included on the original return, I don't see how IRS could add it in their recalculation because IRS wouldn't know, for example, whether one is ineligible for the savers credit because the taxpayer might have been a full time student.

kbl1320
Level 2

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

When will the states get updated or do they even need to be updated if I know my state is following the federal ARPA plan to waive taxes on unemployment?
The message in Turbo tax deluxe links to this
How is my state taxing unemployment income? (intuit.com)
which says;

Missouri (MO)

TurboTax calculations have not been updated for Missouri. If you haven’t filed your return, you can either:

  • Wait for TurboTax to be updated along with your state, or
  • File your return now and potentially amend later if they do not follow the federal guidelines.

    When I check other tax sites it says Missouri will conform to the federal tax exclusion.
    American Rescue Plan - Unemployment Exclusion (taxact.com)

goodoldmonk
Level 1

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

My online Massachusetts state return still has not been updated for the $10,200 unemployment issue. When will this be updated?

DMarkM1
Expert Alumni

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

It appears at this point MA, like many states, has not issued any decision on whether or not they will conform to the new federal tax law.  Once that decision is made by the state tax authority, any updates will be scheduled in TurboTax. 

 

As it stands right now all your unemployment benefits are taxable by MA so the federal exclusion amount would be added back in to your state return.  Hopefully, MA will conform and exclude the benefits per the federal tax law.  

 

 

 

 

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goodoldmonk
Level 1

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

Thank you for your response. Does this mean that if I file my federal and Massachusetts state return right now as-is that my state return would be correct if Massachusetts decides to continue taxing all unemployment benefits? Or does it mean that if Massachusetts decides to continue taxing all unemployment benefits, that some adjustment will need to be made on the state return?

DMarkM1
Expert Alumni

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

Right now the federal update has excluded the unemployment income. If you file and MA does not conform you would need to amend to add the income back in to your MA state return.

 

  

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Kidtageous
Level 2

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

Has New York decided to participate in the rescue act for the $10,200 exemption? If I live in New Jersey and my unemployment was from New Jersey but I work in New York, would filing my New York State tax now change based upon their decision?

LinaJ2020
Expert Alumni

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

As of today, TurboTax program has not been updated for New York.  Select Click on New York.  They are not participating.  

 

Per NY, due to decoupling from the federal American Rescue Plan Act of 2021, the Unemployment Compensation Exclusion Addback should be included on Form IT-558 New York State Adjustments.  

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