Hello, I got the desktop update this morning and re-ran the tax file. The taxable social security does not appear to include the unemployment tax relief of $10,200. Line 3 of the SS Benefits Worksheet says to add Form 1040, 1, 2, 2b, 3b, 4b, 5b, 7 and Schedule 1, line 9. Schedule 1 line now includes the $10,300 credit for the tax break. When I added up the amounts in these lines, the SS worksheet total on line 3 does not equal to the added total with a difference of $10,200. Please advise.
The IRS calculation for taxable Social Security (along with some other items) uses the total unemployment paid amount. In other words, the $10,200 exclusion does not apply to the taxable Social Security calculation. Worksheet instructions need to be updated.
Reference this post:
Thank you. So the instruction on line 3 on the social security benefits worksheet is not correct, and I need to exclude the $10,200 to determine the amount of line 3 (which will be higher by $10,200) then.
Yes. You do NOT exclude the portion of the unemployment that is allowed to be excluded for personal income tax. It is NOT allowed to be excluded when determining your taxable social security amount.
This IRS page will provide specific details about this situation. New Exclusion of Unemployment Benefits
Thank you for the information. Per the excerpt from the link, "New Exclusion of up to $10,200 of Unemployment Compensation", the SS benefits worksheet line 3 says to add Form 1040 line 1,2b,3b,4b,5b, 7 and 8. It doesn't say from schedule 1. Also, line 8 on Form 1040 says "other income from schedule 1, line 9", which would include the $10,200 credit/tax break. I agree that the $10,200 should be excluded from calculating the taxable SS income based on your reply and other posts that I saw, but neither the SS worksheet, nor Form 1040 appears to indicate the $10,200 needs to be excluded in this link. Please advise. Thank you.
When figuring the following deductions or exclusions from income, if you are asked to enter an amount from Schedule 1, line 7 enter the total amount of unemployment compensation reported on line 7 (unreduced by any exclusion amount) and if you are asked to enter an amount from Schedule 1, line 8, enter the amount from line 3 of the Unemployment Compensation Exclusion Worksheet. See the specific form or instructions for more information. If you file Form 1040-NR, you aren’t eligible for all of these deductions. See the Instructions for Form 1040-NR for details.
- Taxable social security benefits (Instructions for Form 1040 or 1040-SR, Social Security Benefits Worksheet)
Also, what about the following:
1. passive income of up to $25,000 allowance on line 7 of Form 8582, Passive Activity Loss Limitation - Would the $10,200 credit be excluded in calculating the MAGI on line 7 (So the MAGI would be higher)?
2. the taxable income used to determine the qualified business income deduction on line 11 of Form 8995, QBI Deduction Simplified Computation - Would that include the $10,200 credit?
Thank you.
To be clear here are the IRS instructions about the social security taxable income and the unemployment benefit exclusion. You two questions above are also answered here for you.
When figuring the following deductions or exclusions from income, if you are asked to enter an amount from Schedule 1, line 7 enter the total amount of unemployment compensation reported on line 7 (unreduced by any exclusion amount) and if you are asked to enter an amount from Schedule 1, line 8, enter the amount from line 3 of the Unemployment Compensation Exclusion Worksheet.
Thank you again for your reply. Line 3 of the SS benefits worksheet indicates only the Form 1040 lines (1,2b,3b,4b,5b,7, and8). It does not say to use any lines on Schedule 1. And line 8 of Form 1040 is from line 9 of Schedule 1, which now includes the 10,200 credit. But I think you are right that the taxable SS income would not take into consideration of the 10,200. It is just that the Exclusion instructions are still not clear to me.
So to summarize, please confirm the followings:
- social security taxable income - do not include the $10,200 credit; the $ on line 3 of the SS benefits worksheet generated by TurboTax is correct.
- passive income limit - do not include the $10,200 credit; the $ (MAGI) on line 7 in Form 8582 generated by TurboTax is correct
- taxable income to determine QBI deduction - includes the $10,200 credit since it is based on the adjusted gross income on line 11 in Form 1040 (which is lowered by the $10,200 credit); so the taxable income on line 11 in Form 8995 generated by TurboTax is correct.
Thank you.
I have spoken to Turbotax tax experts, Turbotax CPA, Turbotax technical person, as well as someone at the IRS. All agree that the the unemployment waivered amount should not be included in the calculation for taxable social security. By adding the non taxable unemployment in this calculation it effectively takes away or greatly reduces the waiver. A representative from IRS told me that the tax software companies have not updated their software to account for this in their social security worksheet, line 3.
From instructions posted on the IRS website as of 4/2/2021. (As mentioned earlier, the Social Security Benefits Worksheet instructions are not correct, should say Schedule 1, line 7, not line 9.)
"When figuring any of the following deductions or exclusions, include the full amount of your unemployment benefits reported on Schedule 1, line 7 (unreduced by any exclusion amount): taxable social security benefits, IRA deduction, student loan interest deduction, nontaxable amount of Olympic or Paralympic medals and USOC prize money, the exclusion of interest from Series EE and I U.S. Savings Bonds issued after 1989, the exclusion of employer-provided adoption benefits, the tuition and fees deduction, and the deduction of up to $25,000 for active participation in a passive rental real estate activity. See the specific form or instructions for more information. If you file Form 1040-NR, you aren’t eligible for all of these deductions. See the Instructions for Form 1040-NR for details."
https://www.irs.gov/forms-pubs/new-exclusion-of-up-to-10200-of-unemployment-compensation
Hello, thank you for providing the link. I opened the link but I am no seeing the quote that you have in you post. I saw the following:
When figuring the following deductions or exclusions from income, if you are asked to enter an amount from Schedule 1, line 7 enter the total amount of unemployment compensation reported on line 7 (unreduced by any exclusion amount) and if you are asked to enter an amount from Schedule 1, line 8, enter the amount from line 3 of the Unemployment Compensation Exclusion Worksheet. See the specific form or instructions for more information. If you file Form 1040-NR, you aren’t eligible for all of these deductions. See the Instructions for Form 1040-NR for details.
The form 1040 instructions SS benefits worksheet line 3 refers only to the lines in Form 1040, not any lines on schedule 1, namely line 7. The SS worksheet in TT does say schedule 1 line 9. So the IRS "new exclusion" guidelines are still not specific if I go by the worksheet in the form 1040 instruction booklet, which is official (vs the worksheet in TT, although I don't understand why the TT SS worksheet doesn't use the exact same wording as shown on the SS worksheet in the form 1040 instruction book). All the posts that I read so far say do not include the $10200 credit when calculating the taxable SS income and determining the passive income loss limitation, and I tend to agree. It would be good if the published "new exclusion" is more clear to provide more certainty.
@syoung123 If you scroll down to the section of the instructions at the link that is titled "Line 7", you will see the text in the third paragraph that starts out "Caution....".
For line 3 of the TT Social Security Benefits worksheet: the amount in the TT instructions labeled "Schedule 1, line 9" instead should be whatever is entered in Schedule 1, line 7, along with any other relevant amounts from Form 1040. So it sounds like you are doing it correctly given the current (confusing) IRS guidance. I can't speak to the Form 1040 instructions except to note that they may have been written prior to the passage of the American Rescue Plan and subsequent IRS interpretation.
All that being said, am waiting to file for several more weeks to see if anything changes, either on the IRS side or TT programming side.
I see the description in the "Line 7" section now. Thank you.
"Caution. When figuring any of the following deductions or exclusions, include the full amount of your unemployment benefits reported on Schedule 1, line 7 (unreduced by any exclusion amount): taxable social security benefits....."
The amount on line 3 of the TT social security benefits worksheet is correct and the taxable social security benefits on line 20 is correctly calculated. As you said, the description of line 3 should be sch 1, line 7 (not line 9).
I think I'll wait another week to file as well to see if there are anymore changes or interpretations. Thank you.
IRS says turbotax calculation on Social Security is not correct. What do I do now. I have ordered a transcript of my return
Did the IRS or Turbotax give you any additional information such as why the social security calculation was incorrect? Did it have to do with unemployment? If so, was it because Turbotax included the unemployment received even though on the worksheet for IRS it did not?
IRS is rejecting my 2021 return and says the calculations for the Social Security overpayment is not correct. I double checked all the W-2s and all information was entered correctly. I do NOT have any unemployment issues or payments. I have encountered alot of bugs this year - never had a problem in the last 15+ years!
When the IRS says your Social Security overpayment is not correct, it means that you are married fining jointly and at least one of your W-2 forms is listed under the wrong spouse.
Please go back and review your W-2 forms and make sure they are not only correct, but that the employee name is correct.
@Oreoeater Do you mean the IRS adjusted your refund?
You only get excess SS back if one person had more than 1 employer and those employers took out more than the max of $8,853.60 (for 2021). Check 1040 Schedule 3 line 11 for it. Then Schedule 3 goes to 1040 line 31.
Are you married and filed Joint? And you both had W2s? The IRS is probably right. They usually are in this case. You assigned both spouse's W2 to the same person so it looked like that person went over the max.
For 2021, Do you still have copies of all the W2s? Look at box 4. Did either of you have more than 1 employer? You only get excess SS back if one person had more than 1 employer and those employers took out more than the max of $8,853.60. So add up your W2 box 4. Is it more? Then add up your spouse's W2 box 4. Is their box 4 more than $8,853.60?
Or check W2 box 12. You may have entered Code A by mistake.
You are correct. The irs told me to exclude it. Do not listen to turbo tax because their software is completely wrong in calculating the exclusion and social security. File an amended return and send it in. I sent mine in and they have approved the exclusion of the )10,200 so do not listen to those who have no clue. Hope you can get the refund you deserve and file the amended return. It took me a solid 14 months to finally get someone at turbo tax to show me how to amend the return accurately.
I think you may be commenting on the wrong thread @Chrys1 this isn't about excluding social security. and there is no 10200 exclusion of social security. last year there was an exclusion of that amount for unemployment but that has nothing to do with this thread.
I was in a thread discussing the exclusion with ssi and unemployment for 2020. Someone asked what they need to do. I replied to her comment. No clue where the screwed up turbo tax software put it. I did my part correctly
I'm doing 2022 taxes (today is 15 April 2023). The taxable social security calculator for 1040 form is seriously screwed up IMO. It doubles the SS amount received. It is wholly inconsistent with the IRS pdf form available here:
Assuming I'm correct, the above is a serious error in the 2022 1040 Turbotax software. What the TT calculator does is DOUBLE the SS amount before figuring the calculable amount. This is ridiculous, and as I note, not what the IRS available worksheet does.
@tiutniwantsdata Where are you seeing a doubled SS benefit amount?
What is shown on the Form 1040 Line 6a?
If using the TurboTax online editions -
Click on Tax Tools on the left side of the online program screen. Click on Tools. Click on View Tax Summary. Click on Preview my 1040 on the left side of the screen.
The "Social Security Benefits Worksheet" in Turbo Tax directs that the number in box 5 of SSA-1099 ("Total net benefits from Box 5 of all SSA-1099 forms") be put on BOTH line A and line F.
Line F is an exact repeat of Line A. If line F is supposed to be a total of lines A through E, it does NOT say that, and the worksheet does not automatically bring the number down. This is really poor form design.
Moreover, even when I leave line F empty, the rest of the worksheet comes up with a number $2,175 higher as taxable SS income than the IRS worksheet I downloaded ("Social Security Taxable Benefits Worksheet (2022)").
This misleading if not outright incompetent form work makes me question the accuracy of everything else in the software. I have been doing my own taxes for years (I'm an attorney, but I don't practice tax law [god forbid]); I have been using this software since it was MacInTax, and I find it has become increasing difficult to use. The cross linkages are less intuitive and mistakes like the above are easy to make and miss.