Hiya
Yep, Unemployment has been a bit tricky this year. Forgive me if you are fully aware of the background but basically:
1. Claimed Unemployment during 2020
2. Received Form 1099G from your State showing how much paid and any tax Withheld
3. Above was all before it was decided that the first $10,200 would be tax free, so all tax software was amended to deal with this change
4. If you had already submitted your Tax Return, IRS said do not do an Amendment as they would do the change for those Tax Returns already sub mitted
5. The States would not be issuing Corrected 1099G Forms so how the software deals with it is to accept your completed 1099G EXACTLY as it shows on the Form - this puts the full amount of UI paid on the Schedule 1 as a Line 7 entry. It also records how much Tax was Withheld and will take that into account to determine tax Due / Refund.
6. The software then places an amount of Negative $10,200 on the Schedule 1 as Line 8.
7. The Line 8 amount of $10,200 is subtracted from the Line 7 amount to give a figure that is entered on the Schedule 1 Line 9 - it is this $amount that comes through on the Tax Return Form 1040 as Line 8 and increases your Total income figure - this assumes that you had Unemployment greater than the tax free $10,200.
8. The net effect is that your UI amount is reduced (to possibly zero) and the extra tax Withheld from the UI reduces your tax Liability - what a winwin!
