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Federal Income Tax withheld from Unemployment compensation

cafsllctax
Level 1

How does ProConnect account for Unemployment Compensation Exclusion of Federal Income tax was withheld from Unemployment Compensation? When I check the Box per instructions or just subtracts $10200 in Schedule 1 line 8 but taxes withheld are still on the 1040 on Line 25b. I would expect it to change or there should be a credit. Please help.

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7 Replies 7
IRonMaN
Level 15

Why would the withholding change?

Barber! Why didn't I think of this before? Getting paid to give out bad tax advice - need I say more? I've run with scissors for years so it is a natural fit.
cafsllctax
Level 1

Not change  per se but there should be a credit to the taxpayer since that money was really not owed up to $10200. Just like Schedule 1 line 8 adjusts the Unemployment amount by $10200 I would expect a similar adjustment to taxes they paid from their compensation. 

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IRonMaN
Level 15

It was cash out of their pocket - it's not going to change.

Barber! Why didn't I think of this before? Getting paid to give out bad tax advice - need I say more? I've run with scissors for years so it is a natural fit.
qbteachmt
Level 15

"but there should be a credit to the taxpayer since that money was really not owed up to $10200"

Yes; go to the bottom of the 1040 to see amounts paid in against what is owed, or what will be refunded.

You seem to be looking for this in the wrong place. Or, thinking about withholding incorrectly. It isn't against what you owe.

It's the IRS making sure you Prepaid for something that you likely will owe for, once you file your tax return. Then, your Tax Return is your entire Financial Life, and that is the reconciliation for what was prepaid by Withholding and Estimates, against the reality of your tax year.

Once you paid in, there is no Adjusting it. It's Paid, already. That isn't Taxes. It's a Payment against taxes.

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qbteachmt
Level 15

"or there should be a credit"

Yes; the withholding will show as "already paid in" against what they owe or as part of what is overpaid. That's how withholding and estimates and refundable credits work on the tax return.

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cafsllctax
Level 1

I am new to ProConnect. I am considering to switch from a different software. When the update was included on that software the Federal Refund amount changed after the update, I am not seeing a similar change in ProConnect. Hence my confusion. I see the Other Income amount change but not the Refund Amount. In the other software the other Income changed after exclusion as well as the refund amount.

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qbteachmt
Level 15

"In the other software the other Income changed after exclusion as well as the refund amount."

Only if it affected a computation that affected the result. That can't be taken as an "Always happens" condition.

It's called Math.

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"Level Up" is a gaming function, not a real life function.
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