Unemployment Tax Bill

[Lee B]

1 hour ago, Burke said:

Yes.  I hadn't planned on filing until that happens, but the procedure works as far as the bottom line within the software. 

Doing this before you software is revised would work for the federal return but what about the state tax return?

[Abby Normal]

3 hours ago, cbslee said:

but what about the state tax return

Yep. Now we have to wait for every state that taxes unemployment to decide whether they will accept the fed change or decouple.

MD is an interesting case because their new law that came out a few weeks ago, uses lower income phase outs for excluding unemployment from taxation. So you could qualify for the federal exclusion but not the MD one. Will MD make the federal exclusion an addition? And when will they decide? How many days left until 4/15?

[HV Ken]

Scenario: Some people have already filed. MFJ, they have UI, and are above the $150,000 threshold. Now all the sudden MFS may provide a better result. But they already filed! Perhaps a paper-filed superseded return could be used here, but how many months before that gets processed given the backlog?

MY BRAIN HURTS!

[BulldogTom]

On 3/8/2021 at 11:27 AM, jklcpa said:

Agree with cbslee.  The Senate's amendment to the bill 

@jklcpa   When the bill talks about AGI in excess of $150K, is that before or after the forgiveness?    I have a couple who otherwise have $148K of AGI before UI.   Already filed the return.    

Of course I would get one like this....

Thanks for your help.   I went looking for the senate bill on Google and only got news articles.

Tom
Modesto, CA

[jklcpa]

@BulldogTom  Here is the direct link to Congress.gov for the entire House bill that went back to the Senate.  Look for Title IX, part 4.  The unemployment provision is in sec 9042.   That entire section is very short, and unless there is some technical correction or somewhere else that references back to the Cares Act and that threshold that I'm not seeing, right now I don't think it's an add-back, but that doesn't mean I'm right or that it won't be in future. I suppose it's possible, just like the n/t portion of social security is an adjustment to arrive at MAGI for the PTC calcs.  Sorry I don't have anything more than that at this time, and don't have time to take a course at the moment, and luckily so far I haven't seen anyone close to the limitation like your client's situation.

https://www.congress.gov/bill/117th-congress/house-bill/1319/text

If you don't want to click the link, google "H.R. 1319" and look for the ones that go to Congress.gov site. That is the official site for the House, and the official site for the U.S. Senate is Senate.gov.

[BulldogTom]

@jklcpa  Thanks.   Here is the answer (formatting is mine):

“(c) Special Rule For 2020.—

“(1) IN GENERAL.—In the case of any taxable year beginning in 2020, if the adjusted gross income of the taxpayer for such taxable year is less than $150,000, the gross income of such taxpayer shall not include so much of the unemployment compensation received by such taxpayer (or, in the case of a joint return, received by each spouse) as does not exceed $10,200.

“(2) APPLICATION.—For purposes of paragraph (1), the adjusted gross income of the taxpayer shall be determined—

“(A) after application of sections 86, 135, 137, 219, 221, 222, and 469, and

“(B) without regard to this section.”.

Tom
Modesto, CA

[jklcpa]

Tom, thank you! That section has been updated since I quoted from it earlier in this post and another post!   That's why we should wait for the final version to be signed into law and discuss pending legislation with caveats. 

[BulldogTom]

I went through my clients this morning and I only have 13 that will need to be amended (unless IRS says they will take care of it through some method other than amending).   I have 4 in the hopper that we put a hold on filing until the dust settles and the IRS gives guidance.   

CA is not a problem as they don't tax UI benefits.   

Have one in Colorado that is already filed.   Nothing on their website yet (I would not expect it until the bill becomes law).   Will have to wait for some guidance from CO before we figure out what to do with that return.

Tom
Modesto, CA