Unemployment income exemption Stimulus

[ErnieS0]

@jdre80 Once new legislation is passed into law and the IRS provides us with guidance on how we need to provide them with the necessary information, we will work quickly to update TurboTax.  

The IRS, and most states, consider unemployment payments as taxable income. This means that you have to pay tax on unemployment payments and report them on your return. With this new law, if your household income is less than $150,000, the first $10,200 of unemployment will be tax-free, but any amount you receive above that will be taxed.

@Stingwcw1999 Payment files will go out this weekend and the bank account effective date will be Wednesday, 3/17/2021. The IRS is expected to release further information on Friday, 3/12/2021. 

You don’t need to do anything to get your stimulus check. The IRS will determine eligibility based on your last tax return (either 2019 or 2020) and will likely send your payment to the bank account where your tax refund was deposited. If you haven’t filed your 2020 return yet, you can do that now to give your most recent information to the IRS, including bank account or address information, to help ensure your stimulus check goes to the right place.

[Marc-1]

Where's the harm in just decreasing the amount of unemployment income equal to the amount excluded by the new statute when entering the information into the program as it currently functions?

[B Camp]

So for those of us who filed before the bill was signed, will Turbotax email us with information once the software is updated in case we need to file an amended return?

[mbk114]

I agree, particularly if the State involved (e.g., CA) doesn't tax unemployment benefits!

[DawnC]

Because we don't know yet how the IRS (and states already have changes pending) is going to handle the income.  You can of course file the way you want.   But considering the delays in processing that all of these changes are going to take, I personally, would not risk it.   There are people that still have not received 2019 refunds.   Filing too early may put your return in a status that could delay it by months.  And if it gets delayed, there will be nothing you can do to speed it up.   Even though you can e-file amendments this year, there were be millions, so why risk it?   @Marc-1

And yes, you will receive communications from TurboTax once the changes are implemented.   @B Camp

[BU26]

Here is an example of how Turbo Tax and/or the IRS can include the exemption of unemployment benefits by updating and adding a new simple Worksheet Form.  When determining the taxable income from 1099G, start with Box 1 the gross amount (i.e. 19,500) then answer a question for which State, Box 2 subtract the Exempt Amount ($10,200) and Box 3 Total Taxable Amount (i.e. $9,300) to report on the applicable tax return. Basically, it's a no brainer.  The entire tax code is filled with hundreds of worksheets.  This would be the quickest way to update the programs and avoid any further delay for people to file as soon as possible. Although it's simple mathematics to all of us, a worksheet has to be saved in the tax file for legitimate reference. By simply subtracting $10,200 you can delay the processing of your return because the IRS computers have to be updated to avoid spitting out letters of unreported income.  That's the only reason the IRS CODE has to be revised.  However, the IRS knew it was coming and should have been ready to roll as soon as the President signed the bill.  And, bottom line it's only for 2020 tax year.

[Hal_Al]

The IRS has published instructions for claiming the $10,200 exclusion (essentially treating it as  a deduction).  TT has yet to update the software. 

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

[BU26]

Thank you.  At least I knew I was on the right track before reading your post and clicking on the link. It all came down to a Work Sheet just as I thought it should be.  Of course, TT has to update if using their tax software. 

Hello to TT: Let's get going and stop posting you are waiting for the IRS.  The IRS is ready. 

[rsd22]

What if someone already paid unemployment taxes when the unemployment was paid out (and that tax withheld shows on the 1099-G)? Will those taxes that were already paid be returned to the user if the user received less than $10,500 in unemployment? 

[DoninGA]

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@rsd22 wrote:

What if someone already paid unemployment taxes when the unemployment was paid out (and that tax withheld shows on the 1099-G)? Will those taxes that were already paid be returned to the user if the user received less than $10,500 in unemployment? 

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You will have to amend your 2020 tax return to get the unemployment compensation exclusion.  But not until the IRS provides guidance.

After the legislation has passed Congress and after the President has signed the legislation and after the IRS has written the rules, regulations and procedures.  And after the IRS has changed any forms or schedules to accept the tax code changes.  And after the IRS has approved the changes in the TurboTax program that apply to the tax code changes, then it will be available for the users of the tax preparation software.

This can take anywhere from several weeks to several months before it becomes available.

See this TurboTax support FAQ for information on the American Rescue Plan - https://ttlc.intuit.com/community/tax-topics/help/how-will-the-stimulus-package-impact-me/00/1393859

[txmet]

The irs has published specific instructions, when will turbotax update the software ,  it appears there are no new forms and the IRS are using exisitng lines with specific steps 

[txmet]

based on what the irs published, there is a section on the interview where it asked if any unemplyment was repaid for 2020 if you put the 10,200 there it will properly show on the correct line, unfortuantly the wording doesnt match.  If i could edit the wording and still file electronically this will work.  Is there a way to edit the text turbtoax list.   as far as coding TT should have a relatively easy update,  if AGI is <150K, they will put the lower of the 10,200 or the amount of UI received on line 8 as a credit

[Hal_Al]

@txmet 

Entering it as paid back unemployment would not put it in the right place, even though it would (probably) get you the right result.  But that would risk a mismatch with IRS computers.

Any workaround involves some risk of error  That said, if you really can't wait, this work arounds appears to put it in the right place, with the right wording:

 In TurboTax (TT), enter at:
- Federal Taxes tab (Personal in  Home & Business)

 - Wages & Income

Scroll down to:

-Less Common Income

      -Misc Income, 1099-A, 1099-C

       - On the next screen, choose – Other reportable income  

       - On the next screen, click yes

       - On the next screen, you'll get blanks to enter the amount and a description. For the amount enter with a minus sign:  -10200. For description type UCE(10200). It will go on line 8 of Schedule 1 as a deduction (-).

That assumes you meet the income limit and  you’re entitled to the full $10,200 and your spouse doesn’t also have unemployment.   See the worksheet at: https://www.irs.gov/faqs/irs-procedures/forms-publications/new-exclusion-of-up-to-10200-of-unemploym...

[markk2213]

When will the revised turbo Tax update 1099G  form with the credit for the 10,200 not taxable part of the unemployment insurance.

I am getting a refund and I would like to file as soon as possible

[DoninGA]

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@markk2213 wrote:

When will the revised turbo Tax update 1099G  form with the credit for the 10,200 not taxable part of the unemployment insurance.

I am getting a refund and I would like to file as soon as possible

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After the legislation has passed Congress and after the President has signed the legislation and after the IRS has written the rules, regulations and procedures.  And after the IRS has changed any forms or schedules to accept the tax code changes.  And after the IRS has approved the changes in the TurboTax program that apply to the tax code changes, then it will be available for the users of the tax preparation software.

This can take anywhere from several weeks to several months before it becomes available.

See this TurboTax support FAQ for information on the American Rescue Plan - https://ttlc.intuit.com/community/tax-topics/help/how-will-the-stimulus-package-impact-me/00/1393859