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So it is now officially official

IRonMaN
Level 15

I'm glad they are a little slow right now so they have time to start pushing these out right away:

 

IRS to recalculate taxes on unemployment benefits; refunds to start in May

WASHINGTON – To help taxpayers, the Internal Revenue Service announced today that it will take steps to automatically refund money this spring and summer to people who filed their tax return reporting unemployment compensation before the recent changes made by the American Rescue Plan.

The legislation, signed on March 11, allows taxpayers who earned less than $150,000 in modified adjusted gross income to exclude unemployment compensation up to $20,400 if married filing jointly and $10,200 for all other eligible taxpayers. The legislation excludes only 2020 unemployment benefits from taxes.

Because the change occurred after some people filed their taxes, the IRS will take steps in the spring and summer to make the appropriate change to their return, which may result in a refund. The first refunds are expected to be made in May and will continue into the summer.

For those taxpayers who already have filed and figured their tax based on the full amount of unemployment compensation, the IRS will determine the correct taxable amount of unemployment compensation and tax. Any resulting overpayment of tax will be either refunded or applied to other outstanding taxes owed.

For those who have already filed, the IRS will do these recalculations in two phases, starting with those taxpayers eligible for the up to $10,200 exclusion. The IRS will then adjust returns for those married filing jointly taxpayers who are eligible for the up to $20,400 exclusion and others with more complex returns.
 
There is no need for taxpayers to file an amended return unless the calculations make the taxpayer newly eligible for additional federal credits and deductions not already included on the original tax return.

For example, the IRS can adjust returns for those taxpayers who claimed the Earned Income Tax Credit (EITC) and, because the exclusion changed the income level, may now be eligible for an increase in the EITC amount which may result in a larger refund. However, taxpayers would have to file an amended return if they did not originally claim the EITC or other credits but now are eligible because the exclusion changed their income.

These taxpayers may want to review their state tax returns as well.

According to the Bureau of Labor Statistics, over 23 million U.S. workers nationwide filed for unemployment last year. For the first time, some self-employed workers qualified for unemployed benefits as well. The IRS is working to determine how many workers affected by the tax change already have filed their tax returns.

The new IRS guidance also includes details for those eligible taxpayers who have not yet filed.

The IRS has worked with the tax return preparation software industry to reflect these updates so people who choose to file electronically simply need to respond to the related questions when electronically preparing their tax returns. See New Exclusion of up to $10,200 of Unemployment Compensation for information and examples. For others, instructions and an updated worksheet about the exclusion were available in March and posted to IRS.gov/Form 1040. These instructions can assist taxpayers who have not yet filed to prepare returns correctly.

ACME Taxes, Tatoos, Tires and Tomatoes (I had to get rid of the turtles - they kept running away)
Labels (1)
22 Replies 22
IRonMaN
Level 15

And as soon as I posted this, I was notified that I was awarded the coveted 50 Conversations Badge.  It's kinda equivalent to the Nobel Prize, right?

ACME Taxes, Tatoos, Tires and Tomatoes (I had to get rid of the turtles - they kept running away)
TAXOH
Level 11
Level 11

Thanks for posting this.  But more importantly, congratulations on the new badge.

IRonMaN
Level 15

Thanks -------- I'm so excited.  I just wish I could walk around town right now to show it off, but with this COVID stuff, I'm still hiding down my basement.

ACME Taxes, Tatoos, Tires and Tomatoes (I had to get rid of the turtles - they kept running away)
TAXOH
Level 11
Level 11

I don't know how you would even be able to walk around if you had all of your badges on at once.  

grossie
Level 4

Walmart is so lucky to get you!

IRonMaN
Level 15

Thanks ----- I'm going to shoot for making employee of the month for June.

ACME Taxes, Tatoos, Tires and Tomatoes (I had to get rid of the turtles - they kept running away)
0 Cheers
chasetax
Level 7

guess its better than the ignoble prize !!

IRonMaN
Level 15

"guess its better than the ignoble prize !!"

I've won that several times 😁

TAXOH - I tried that one time.  But it got really sore pinning all of them through my fur so I don't do that anymore.

ACME Taxes, Tatoos, Tires and Tomatoes (I had to get rid of the turtles - they kept running away)
IRonMaN
Level 15

"What about those that have a W2 they forgot in addition to the UI excluded amount....do we wait for IRS to correct UI, then amend for the missing W2?  Or can I amend for all of it right now?"

Maybe that information is part of the big announcement that you announced was coming the other day that hasn't come yet 😀

ACME Taxes, Tatoos, Tires and Tomatoes (I had to get rid of the turtles - they kept running away)
BobKamman
Level 14

"The IRS will then adjust returns for those married filing jointly taxpayers who are eligible for the up to $20,400 exclusion and others with more complex returns."

You notice they don't say when this will start (or end). Do you think they'll do those "complex" returns any faster if a 1040-X is filed?

And nothing about whether interest will be paid on the refunds -- as it would be, if amended returns are filed. 

IRonMaN
Level 15

Picky, picky, picky. 😃

ACME Taxes, Tatoos, Tires and Tomatoes (I had to get rid of the turtles - they kept running away)
The_AntiTax_Man
Level 5

@BobKamman  So. the IRS still has millions of unprocessed 2019 returns that it is slogging through.  Do you think the IRS can get this 2020 UI project done in a timely manner?

Could be that the IRS just fears receiving millions of paper 2020 amended returns.  Makes them look bad to the congressional oversight committees when they can't get it all done.  

 

IRonMaN
Level 15

Of course they can't.  It was their attempt to avoid having to deal with 9 bazillion paper amended returns that would have shown up on their doorstep.  Now that they have made the announcement, they should be down to 5 bazillion paper amended returns showing up on their doorstep.

ACME Taxes, Tatoos, Tires and Tomatoes (I had to get rid of the turtles - they kept running away)
Just-Lisa-Now-
Level 15
Level 15

There is no need for taxpayers to file an amended return unless the calculations make the taxpayer newly eligible for additional federal credits and deductions not already included on the original tax return.

 

What about those that have a W2 they forgot in addition to the UI excluded amount....do we wait for IRS to correct UI, then amend for the missing W2?  Or can I amend for all of it right now?


♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
dkh
Level 11

If it were me- I would amend for all of it right now especially since you can efile the amendment.  You don't know when IRS will get to that particular client and what if the missing W2 holds up the unemployment correction.

BobKamman
Level 14

Or is IRS blocking all e-filed amended returns with UC changes?

dascpa
Level 8

That's great but unless states do the same will still have to amend those.

clr600
Level 7

We might as well amend Federal because we have to amend the State.

BobKamman
Level 14

Single or HoH, under $150K – Easy, regardless of UC amount.

MFS, under $150K – Complex, might involve community income.

MFJ, under $150K, under $10,200 UC – Easy.

MFJ, under $150K, more than $10,200 UC – Complex.

So IRS can probably do this for more than 90% of returns. 

Let's see, if this gets the AGI below $75K or $150K, and IRS has said it will refigure EIP#3 if the 2020 return shows eligibility and is processed before July 15 (or August 15, if the "due date" is considered May 17) -- should we tell clients just to wait and trust IRS to get it done by then?  Even if an amended return is filed, will that be considered when determining if EIP#3 can be recalculated?

IRonMaN
Level 15

I'm not amending anything ---------------- I'm going to be too busy saying "welcome to Walmart" to have time for that silliness. 

ACME Taxes, Tatoos, Tires and Tomatoes (I had to get rid of the turtles - they kept running away)
BobKamman
Level 14

Meanwhile, in news from the Beaver State:

SALEM, OR—The Department of Revenue today announced it will adjust the tax returns for Oregon taxpayers who have already filed their 2020 returns and are due relief from income taxes paid on recently exempted unemployment benefits earned in 2020.

“These taxpayers have already done what they were supposed to do. They filed their tax returns on time,” Revenue Director Betsy Imholt said. “We’re going to fix those returns to make sure these taxpayers get the proper refund under the new federal law.”

https://www.oregon.gov/newsroom/Pages/NewsDetail.aspx?newsid=54408

 

taxiowa
Level 8
Level 8

I did have 2 of the ones I was holding change another part of the return, when the UCE was applied.  The retirement savings credit is tied to AGI Not MAGI.  So the UCE lowered them down to a point where an IRA could save them an extra $200 or so on their return.  Most other calculations are based on MAGA not AGI so are not affected.  Or was MAGA another time or dream gone by.