California unemployment compensation adjustment relate to American Rescue Plan $10,200 deduction

[GC]

After the software update, the federal AGI includes the $10,200 deduction of the unemployment compensation. However, the California state return Schedule CA still subtract the full amount of the UI. Should not this subtraction exclude the $10,200 deduction at Federal return? Otherwise there will be double deduction of this $10,200. Should we manually change this amount? Please advise. Thank you.

[robgarc]

Good evening California unemployment is not taxable income, so the 10,200 deduction would only be applied to federal returns. For the state of California only 

[GC]

Thanks for reply. That is correct that the UI is not taxable at California. The schedule CA already deduct the full amount of the UI. However, when CA calculating CA AGI, it use Fed AGI and subtract California adjustments. The California adjustment will includes full amount of UI which Fed AGI already deduct $10,200. There will be double deduction when you let the software calculate. 

[Just-Lisa-Now-]

Ive been adding back the UI exclusion on the 540 Sch CA, Line 8F

[NU]

I've been doing the same. CA Line 8F "UCE adjustment" with an addback.  

I had already been following IRS instructions on how to report UCE, so with the software upgrade, I've had to go back to all my UC clients and remove my edits on the Federal so as not to double deduct the UCE on there.  

It's been an interesting season to the say the least, but the UCE has been a great help to several clients who otherwise would have had some major surprises!

[Just-Lisa-Now-]

I wonder if I lock all my previously filed returns before updating, it that will stop the program from changing them....I havent updated at the office yet, I think I'll try it, save me some hassles down the road, Im not digging them all out and fixing them right now.

[ceciengcpasf]

We're doing the same thing making the 10,200 an addback in the state CA adjustment.  I wonder why Proseries never adrresses this issue ?  Could have been an easy thing for them to program into system.

[Just-Lisa-Now-]

They may eventually get the states updated right.

I locked down all my returns that I filed previously with the manual adjustments before updating for the UI fix....so all my previously filed returns havent been affected by the updated change.

[SKukuryak]

Are you adding back the flat $10,200? or adjusting based on the difference of the UI?

[Just-Lisa-Now-]

Im adding back whatever the UCE adjustment was that was made on the federal.

[sjrcpa]

I wonder why Proseries never adrresses this issue ?

Really? CA was correct before Congress decreed up to $10,200 unemployment was not taxable at the federal level. 

Then IRS gave guidance on how to report it. Intuit incorporated that guidance.

Intuit hasn't gotten to/thought of all the state ramifications yet.

Never addresses this issue is a bit strong. And I'm not a big defender of Intuit.

[Mesiasp]

Intuit should not have placed the exempt Unemployment amount on Line 8 of Section B on Schedule CA.  We would have been spared the effort of putting adjustment on Line 8f.

[Just-Lisa-Now-]

Spared the effort LOL It literally takes less than 30 seconds to make the adjustment.

[bbsmod]

Believe this messes up State EIC, changed how much STATE EIC my returns show.  One would go from none to getting $1,137.00.

[Just-Lisa-Now-]

all you're doing it putting back what the federal exclusion took away.

[bethlynnkelly]

I did the CA unemployment adjustments manually before the updates automatically added it to line 8f...and I did not notice the update quickly enough.  I efiled 8 CA returns with the unemployment exclusion doubled the amount on 8 f, so I've got 8 to amend on May 18th.  Fudge.  Thanks for the heads up...could've been much worse.  This whole tax year is a dumpster fire.

[Just-Lisa-Now-]

Ive been taking that extra 30 seconds to verify the amount showing on the 8879 with the amount showing on the screen before I hit the Efile button.

[Bsch4477]

While correcting the deduction on 8 f, California still has a problem. California calculates eligibility for EIC based on the federal AGI. Since the federal AGI is reduced by the unemployment deduction some taxpayers will newly be eligible for CA EIC. California has not yet given any guidance about this issue. 

[Mesiasp]

I am in the same boat as you are. I have 10 clients to amend under the same situation.  Thinking of relaxing after May 17 is wishful thinking. Oh...

[kitty2]

Unemployment is not taxable in CA.  The full amount will be removed from the CA return.

[Just-Lisa-Now-]

I think theyre saying that the CAEITC uses the Fed AGI, which has now been reduced by the UCE...and whether thats correct or not.