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

[hicowgirl]

I am curious as to what the answer to this question will be! I just want to finish up may taxes and get them off my plate. This exemption will be the difference between making a payment or getting a refund so I am very curious.

[hicowgirl]

ahhhhhh, thank you for this reply. I will wait to file.

[GeorgeHarrisonTaxMan]

So what should somebody in my situation do:

I have about $16,200 in unemployment compensation in 2020.    $10,200 of this amount is supposed to be exempt from taxes.

So technically, I'm only supposed to be taxed on $6,000 of unemployment compensation! ($16,200 - $10,200)

So now Turbo Tax is saying it might take weeks or months to update its program, what do I do?  I don't have months to wait...taxes are due in 4.5 weeks!  (I just spent $74.27 for Turbo Tax Premier). 

I just called the IRS and the agent I spoke with suggested that I do my taxes on their IRS.GOV website.....UGH....I've already spent 3 hours inputting all my information on Turbo Tax.

[Ed805]

Is it possible we will be notified once TurboTax has been updated to reflect the changes or do we need to keep checking back for updates?

[xmasbaby0]

Those of us who are answering questions get that you need to know what to do about your unemployment and so does TurboTax.   But this law was literally just signed yesterday.   There are no answers yet.  Congress changed a tax law in mid-tax season that affects millions of people, and now the IRS and all the tax software companies have to sort out how it will all work.   We do not yet know if they will decide to extend the tax filing deadline, or what the guidelines for this are going to be.  Even the IRS cannot tell you anything yet.   The software cannot yet accomodate the tax law change.  So.....patience and check in a few days....we hope to know more soon....

[Critter-3]

Ok ... all of the 10 IRS FREE FILE companies are in the same boat ... until the IRS figures out how to implement this change AND  the all the tax programs have the ability to update and test their programs  NO ONE will be able to file a return with the reduced unemployment.   EVERYONE must take a deep breath and wait patiently while we deal with what congress just did to us.  

If the reduction of your unemployment means you will still owe then wait for further instructions ... you may need to pay what you will owe after the change by 4/15 to avoid a penalty even if you put the return on extension.  (they may extend the filing deadline to 6/15 so wait and see)

If the reduction will increase your refund then don't file until this has been updated.  If you do file early then you will have to wait until you get the original refund so you can amend the return.  

[lainie13]

So basically everyone will have to amend their returns, or get a penalty because you didn't file on time.  

[macuser_22]

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@lainie13 wrote:

So basically everyone will have to amend their returns, or get a penalty because you didn't file on time.  

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No, not necessarily, since we do not know how the IRS will implement it until they write the rules.

If you file for an extension, then  you have until Oct 15 to file, but if you owe additional tax, that must be paid by Apr 15.  If you are getting a refund then then is no penalty reguardless of when you file.

[Critter-3]

One can always put the return on a 6 month extension to avoid the failure to file penalty even if you owe.  

The failure to pay penalty can be avoided by paying what you expect to owe by the filing deadline with the extension form 4868. 

If you are getting a refund there are no penalties for filing late so all is well. 

[Sbrown12123]

I saw that earlier. So, hopefully by the end of March.

[Critter-3]

There are a lot of postings out there but until the word comes from the IRS directly I would not bank on it ... waiting to file is a good idea and is highly recommended.  

[xmasbaby0]

I have three family members whose returns I prepare and they are affected by this---I have let them know in no uncertain terms that I am NOT filing their returns yet.   We are waiting until the dust settles on this and until we hear something definitive from the IRS.   

[fbmcardl2]

Don't hold your breath. An understaffed IRS now has to deal simultaneously with processing 2020 returns, issuing stimulus payments, and rewriting the regulations for the Code sections affected by the new law. And then there's the question about how the new change in unemployment benefits taxation will affect state income tax returns for 2020 that are also in process. Maryland, for example, has delayed it's 2020 tax return deadline until July 15, saying: "“We’ve never before seen so many changes to the current year’s tax code in the midst of the tax filing season,” Comptroller Franchot said. “We’re realistic about the burden this puts on taxpayers, tax preparers and our staff, which is why I’m taking this emergency action to extend the tax filing deadline to July 15.”

[poley17]

that is incorrect

[bethegc]

What Does the New Unemployment Bill and Stimulus Mean for 2020 Tax Returns? Unemployment income

Normally, you would have to pay regular taxes on any unemployment benefits you’ve received, but the new bill gives a tax exemption to the first $10,200 of unemployment insurance received in 2020. 

Details on how exactly to claim the exemption will become more clear after the IRS issues guidance to taxpayers.

If you filed jointly, and both spouses received unemployment benefits, the text of the law implies both spouses should each be able to claim the exemption.

If you already filed your tax return for 2020 and paid taxes on any unemployment benefits received, you can submit an amendment to get that money back. If you haven’t filed yet, you’ll be able to reduce your unemployment income by $10,200.