Unemployment Exemption of $10,200

[mikec610]

My client has $58,000 of Unemployment. Is there an upper limit on income that precludes him from getting the exemption of $10,200. Sadly, when he became unemployed he and his wife took everything out of the retirement plans which increased their income significantly. The software is not giving the exemption. I have updated and my other clients who have exceeded the $150,000 are receiving the exemption. The only thing I can think is that there is an upper limit. Why is it that clients act and never consider the ramifications of their actions!

[Just-Lisa-Now-]

Which column do you have the UI listed in on the 1099g worksheet?

For Single it needs to be in column 1, if you put it in column 2, it doesnt seem to pick it up properly.

[mikec610]

Hi Lisa

I do have it in column 1?? Shows on Schedule 1 line 7 but no exclusion on line 8!!!

[qbteachmt · Accepted solution]

"The only thing I can think is that there is an upper limit."

Yes, there is an upper limit. You should read the entire info:

https://www.irs.gov/forms-pubs/new-exclusion-of-up-to-10200-of-unemployment-compensation

That way, you can understand what applies to each client.

Since they took distributions, if they qualify as coronavirus disaster distributions, you might want to suggest they spread the taxable income over three years. That is part of the 8915-E instructions.

[Terry53029]

Here is the work sheet from IRS: 

Unemployment Compensation Exclusion Worksheet – Schedule 1, Line 8

1. If you are filing Form 1040 or 1040-SR, enter the total of lines 1 through 7 of Form 1040 or 1040-SR. If you are filing Form 1040-NR, enter the total of lines 1a, 1b, and lines 2 through 7.
    
2. Enter the amount from Schedule 1, lines 1 through 6. Don't include any amount of unemployment compensation from Schedule 1, line 7 on this line.
    
3. Use the line 8 instructions to determine the amount to include on Schedule 1, line 8, and enter here. Do not reduce this amount by the amount of unemployment compensation you may be able to exclude.
    
4. Add lines 1, 2, and 3.
    
5. If you are filing Form 1040 or 1040-SR, enter the amount from line 10c. If you are filing Form 1040-NR, enter the amount from line 10d.
    
6. Subtract line 5 from line 4. This is your modified adjusted gross income.
    
7. Is the amount on line 6 $150,000 or more?
    

   a. [ ] Yes. Stop You can't exclude any of your employment compensation
   b. [ ] No. Go to line 8

[abctax55]

You should consider/evaluate Married Filing Separate to see if one or both would then be under the $ 150,000 threshold.