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

[Systems_Guy]

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]

@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]

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@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.

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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.

[fbmcardl2]

@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]

@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]

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@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,

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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.

[fbmcardl2]

@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]

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]

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

[DMarkM1]

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.  

[goodoldmonk]

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]

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.

[Kidtageous]

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]

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.  

[fooksman1]

So its now March 31.......I should wait to file my son's 2020 return , because Turbo Tax 2020 Deluxe has not changed their software to reflect the new part of Stimulus 3 Package which was passed by both Congress and the Senate and passed into law , and signed by the President ?