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ProSeries Update for Unemployment calculation

Cherylle
Level 2

The update to the Federal 1040 for the Unemployment calculation is flowing through to the Hawaii State Tax calculation, however Hawaii as not issued a decision as to the conformity with this change. No warning appears on the Hawaii State forms regarding this. I am wondering if returns for other States have a similar situation and what Intuit's plans for addressing this are.

 

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11 Comments 11
IRonMaN
Level 15

The update fixed the federal but you are on your own figuring out if you need to make a state adjustment 


Slava Ukraini!
Cherylle
Level 2

I don't know whether to laugh or cry at your response, but thank you.

IRonMaN
Level 15

It's just the icing on the cake to celebrate a fun filled tax season 🎂


Slava Ukraini!
taxes96786
Level 9

I don't know whether you are based in Hawaii or doing the returns from out of State. I can tell you this:

Hawaii was going to pass a bill to waive tax on unemployment until the American Recovery bill put a line in that said if any State took the latest round of federal stimulus monies they could not waive state UI taxes.

The Feds are overstepping their authority but Hawaii govt backed off and other States have sued over this issue.

What I don't understand is:

If the Feds gave Hawaii stimulus money that covered UI payments how can Hawaii tax the 10,200 that the Feds are waiving.  This wasn't Hawaii's money to begin with. I would to enter the amount in other Hawaii subtractions to back it out but don't know will happen if I do.

I will try to reach someone in the tax office. If I get a response i will post it.

Hawaii has also not extended the filing date for the returns. This also doesn't make sense because you have to prepare the Fed return in order to prepare the Hawaii return. But then again....I can't think of one thing this State Government has done that makes any sense.

qbteachmt
Level 15

"until the American Recovery bill put a line in that said if any State took the latest round of federal stimulus monies they could not waive state UI taxes."

Could you put the link to this or copy that section, please. Montana already excludes all UI, as do some other States. They didn't change their rule based on anything like that condition.

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BobKamman
Level 15

Hawaii had already made up its mind not to allow an exclusion for unemployment before ARPA was enacted, just as they had made up their minds to increase its individual income tax rates to the highest in the country – higher than California.

“The federal government has a right to print money and the state doesn’t. We have to balance our budgets,” said Isaac Choy, director of the Hawaii Department of Taxation. “So every single time we give a tax benefit, like the non-taxability of U.I., or the deductibility of the PPP, the money has to come from somewhere.”

“We’ve been telling people, hey, you know, we’re not going to conform, we’re not going to conform, we’re not going to conform,” Choy said. “I don’t want to be the Grim Reaper here, but there were enough clues there that people should have been aware that there were some tax consequences to this. It shouldn’t have come as a surprise.”

The restriction in ARPA on the state tax cuts is brief and vague, but potentially quite broad:

“A State or territory shall not use the funds provided under this section or transferred pursuant to section 603(c)(4) to either directly or indirectly offset a reduction in the net tax revenue of such State or territory resulting from a change in law, regulation, or administrative interpretation during the covered period that reduces any tax (by providing for a reduction in a rate, a rebate, a deduction, a credit, or otherwise) or delays the imposition of any tax or tax increase.”

A Treasury spokesperson stipulated last month that the provision does not prohibit states from enacting tax cuts so long as those reduction do not rely on federal aid. And Hawaii could certainly point out that the decrease in taxes on the unemployed is offset by the increase in taxes on the wealthy.

For more of a discussion (from the conservative Tax Foundation) on the state tax cut prohibition, see

https://bit.ly/3cOTFnP 

taxes96786
Level 9

Read the law. It is in the paragraph related to the 10,200. waiver on UI payments

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taxes96786
Level 9

I wish Hawaii was aware of that. They are acting like they are not. Are you familiar with Hawaii politics? They don't know how to do anything right. They are holding up filing of returns because they are still trying to decide whether to adopt the Feds covid tax rules.

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BobKamman
Level 15

I am familiar with politics.  Why do you think Hawaii is any different?

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taxes96786
Level 9

Its politics are worse than other States.

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BobKamman
Level 15

States that pass tax cuts to conform with recent federal tax changes won’t run afoul of a rule in President Joe Biden’s economic rescue bill that says states can’t use federal stimulus funding to pay for cuts, the U.S. Treasury Department says.

“Regardless of the particular method of conformity and the effect on net tax revenue, Treasury views such changes as permissible under the offset provision,” according to a department statement released late Wednesday (April 7).  

https://www.bloomberg.com/news/articles/2021-04-08/states-wanting-stimulus-aid-can-cut-taxes-to-alig...