Get Ready to Amend Some Tax Returns

[ETax847]

Per the deal reached yesterday in the Senate, "the deal will extend a jobless benefit supplement at the current $300 per week through Sept. 6, according to NBC News. It will make the first $10,200 in unemployment aid non-taxable to prevent surprise bills. The provision will apply to households with incomes under $150,00"

This is not official yet, but its something to keep in mind, as there will be the need to amend many tax returns.  As if tax season was not full of enough headaches.

 

[Randall]

Somebody else posted that the exemption from income would apply to 2021, not 2020.  Anyone hear any clarification on this?

 

[ETax847]

Per this article: 

https://www.cnbc.com/2021/03/05/unemployment-benefits-deal-to-waive-taxes-on-first-10200-dollars-of-ui.html

As part of that compromise, Democrats added language to the bill that would provide a tax waiver on up to $10,200 of unemployment insurance benefits for 2020, staff for Sen. Ron Wyden, D-Ore., confirmed Friday to CNBC Make It.

 

 

[jklcpa]

One of the amendments agreed to was to make this $10,200 apply to 2020. Below is the link to the actual pdf containing H.R. 1319, and the amendment is Sec 9042(c) wtihin that document.

https://fm.cnbc.com/applications/cnbc.com/resources/editorialfiles/2021/03/05/Amendment_UI.pdf

[Lion EA]

Households with income less than $150,000.

I was just talking to a dependent/college student with over $12,300 in unemployment benefits; that's her entire income. (She usually earned $4,000 from Macy's in her local mall.) However, she's a dependent and lives with her parents while attending college. Her parents earn well over $150,000. Does the daughter's household include her parents when determining the taxability of her unemployment benefits?

[Lee B]

I haven't done any returns for clients who received unemployment benefits, however I have some in my to do pile.

If this bill gets signed into law, our tax software  will probably get revised fairly quickly.

My concern is what will Oregon do ?  Oh well, back to working on PPP Loan Applications.

[Lion EA]

I know, I have 13 states. This one is CA that does NOT tax unemployment benefits, but I have some in my stack that are CT that DOES tax unemployment benefits and other states that I have to look up. Every return has at least one new thing that takes me a few minutes. I am VERY far behind.

[jklcpa]

I've talked with the clients in so far that have received UI benes and all have agreed to wait. Some are ready to print when the change comes through and some untouched.  My affected clients are all in DE that starts with Fed AGI and had already made it n/t as a subtraction, so that adjustment will need to be removed by the programmers as well, but iirc Drake's state input will allow an override to that line.

[Possi]

Amendments will have to happen after tax season. 

I've already done a ton. 

 

[Pacun]

I am filing as laws have been written regardless of what will happen.  It is not my fault that Congress will change them retroactively. 

I guess Congress gave me a chance to create demand for my services and file those with unemployment benefits as soon as they hit my desk. lol.

For sure we will have to amend a lot of returns but I don't have a crystal ball to see what will happen and I am filing as clients are coming in.

 

[Possi]

3 minutes ago, Pacun said:

I am filing as laws have been written regardless of what will happen.  It is not my fault that Congress will change them retroactively. 

I guess Congress gave me a chance to create demand for my services and file those with unemployment benefits as soon as they hit my desk. lol.

For sure we will have to amend a lot of returns but I don't have a crystal ball to see what will happen and I am filing as clients are coming in.

 

YES, this.

[jklcpa]

44 minutes ago, Pacun said:

I am filing as laws have been written regardless of what will happen.  It is not my fault that Congress will change them retroactively. 

I guess Congress gave me a chance to create demand for my services and file those with unemployment benefits as soon as they hit my desk. lol.

For sure we will have to amend a lot of returns but I don't have a crystal ball to see what will happen and I am filing as clients are coming in.

 

 

True, the retroactive changes aren't your fault, but I think at a minimum you now have a responsibility to inform clients of the potential change to their returns and give them the choice to file or wait.

I only have a handful that came in recently and they chose to wait a week or so rather than amend and then have to wait for a refund that may take months to receive, or pay a balance due that will end up a refund once the change is signed into law and is incorporated into the program.  After all, they do hire me to work on their behalf to achieve the best possible result.

[Pacun]

I agree but most of my clients are from the restaurant industry and most of them collected unemployment. Some of them are using last year EI for EIC and additional child tax credit. Those people need their refund.  If I see that someone will owe, maybe I will ask them to wait.

In the past our industry has dealt with numbers and facts. Now we need to get a crystal ball and have it next to our calculator. 

[JohnH]

My crystal ball almost always flashes “4868” when there are any questions or potential issues. 

[Possi]

 

10 minutes ago, jklcpa said:

 

True, the retroactive changes aren't your fault, but I think at a minimum you now have a responsibility to inform clients of the potential change to their returns and give them the choice to file or wait.
 

Knowing that this is coming, I will encourage those still coming to wait to file, but I have already done so many it will be difficult to pick them out right now. I need to, but it will be challenging. 

[JohnH]

Just now, Possi said:

 

Knowing that this is coming, I will encourage those still coming to wait to file, but I have already done so many it will be difficult to pick them out right now. I need to, but it will be challenging. 

Don’t worry. As soon as they read the news or talk to their friends they will be calling YOU.  

[Possi]

1 minute ago, JohnH said:

Don’t worry. As soon as they read the news or talk to their friends they will be calling YOU.  

Thanks.... or as soon as they get their hair done. 

[Slippery Pencil]

1 hour ago, jklcpa said:

True, the retroactive changes aren't your fault, but I think at a minimum you now have a responsibility to inform clients of the potential change to their returns and give them the choice to file or wait.

It's not like this is totally out of the blue.  The bill was introduced the first week of February and there's been discussion about it on all six tax bulletin boards I frequent.  You've had a responsibility to inform your clients for the past month that there was a possibility of this happening.

[jklcpa]

57 minutes ago, Slippery Pencil said:

It's not like this is totally out of the blue.  The bill was introduced the first week of February and there's been discussion about it on all six tax bulletin boards I frequent.  You've had a responsibility to inform your clients for the past month that there was a possibility of this happening.

 

I agree with you and I have been doing so all along.  I hope your comment was directed to Pacun and to Possi and any others who agreed with him.  To refresh, I did say this in one of my earlier posts above:

Quote

I've talked with the clients in so far that have received UI benes and all have agreed to wait.

 

[Pacun]

Also, I am under the impression that April 15 is the last day to file taxes. So, I don't want to be postponing any tax returns.  I will be happy to amend for my clients. I never charge for the first amendment. So, I will amend as needed. I have not heard HR is turning away people because they collected unemployment, nor are they collecting forms from people and waiting for the laws to change.  Oh, but I keep forgetting that the VPs of HR block make MUCH MUCH MUCH more than what I make without touching a 1040 form.  I guess the difference is that they are running a business. 

[Sara EA]

Does anyone in congress have any idea of what they just did to tax pros and taxpayers alike?  Many, many people have already filed, and a lot of them owe because they had no withholding from their UI.  The states each have to decide what they will do about adopting the federal and issuing refunds.  A lot of tax pros are either going call it a day tonight or quit tomorrow morning.  Yes, the law helps some people but caused untold amounts of havoc.

My hope is that IRS can do this without the need for amendments by reprogramming their systems.  After all, there is a dedicated line on the tax return for UI,  and IRS certainly doesn't want to deal with a billion amendments.  Clients who owe and don't plan to pay until April 15 may need us to do some calcs for them so they have to come up with less cash.  We can't do that until we find out what IRS and the states are going to do.  And we won't have time because Monday morning the phones will start ringing with questions about will I get $1400 and when?  ARRRRRRRRRRRGGGGGGGGHHHHHHH!!!!!!!!!!

[BulldogTom]

28 minutes ago, Sara EA said:

Does anyone in congress have any idea of what they just did to tax pros and taxpayers alike? 

No.

Do they care?

No.

Tom
Modesto, CA

[NECPA in NEBRASKA]

I have only had one return with unemployment so far and she lost her appeal. She now has to pay it back, because the state didn't think that having to leave the dorms and move 40 miles away was a good reason to quit her fast food job. Nobody was hiring here when she came home. I feel for her, because she is just a kid and they should not have given it to her in the first place if that was not a good enough reason. The state gave millions of fraudulent $ to unknown and random people that they will never get back. 

Rant over. 

[JohnH]

Imaginary conversation next week.

CL: (Monday) "When do you think I'll get my $1,400?"
ME: "Maybe Friday"

CL: (Friday) "Hey, it's Friday and I didn't get my check!"

ME: "Oh, sorry. Did you think I meant THIS Friday?  I did't say WHICH Friday - we still have 40 of them to go in this year alone."

 

[Randall]

9 hours ago, Sara EA said:

Does anyone in congress have any idea of what they just did to tax pros and taxpayers alike?  Many, many people have already filed, and a lot of them owe because they had no withholding from their UI.  The states each have to decide what they will do about adopting the federal and issuing refunds.  A lot of tax pros are either going call it a day tonight or quit tomorrow morning.  Yes, the law helps some people but caused untold amounts of havoc.

My hope is that IRS can do this without the need for amendments by reprogramming their systems.  After all, there is a dedicated line on the tax return for UI,  and IRS certainly doesn't want to deal with a billion amendments.  Clients who owe and don't plan to pay until April 15 may need us to do some calcs for them so they have to come up with less cash.  We can't do that until we find out what IRS and the states are going to do.  And we won't have time because Monday morning the phones will start ringing with questions about will I get $1400 and when?  ARRRRRRRRRRRGGGGGGGGHHHHHHH!!!!!!!!!!

They're mad.  The retroactive thing takes the cake.  I too hope the IRS can just reimburse them.  But probably not.  I've printed out a list of those already filed, will check to see who got unemployment.  Another list of those I've completed but not yet filed.  I'll let them and the new ones coming in know ahead of time.  They still have to make if final, IRS and software companies get updated.  Then there's the states.  I usually only deal with two, KY and OH.