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Copied from the current Federal Tax Development Blog: "As a tax adviser, you may have recently installed a tax software update to take into account the unemployment compensation exclusion for 2020 passed as part of the American Rescue Plan Act of 2021 and found at IRC §85(c). Now it turns out that, due to an IRS change of heart on how to read IRC §85(c)(2)(B), your software may now be subjecting unemployment to tax the IRS has now decided is not to be subject to such tax. On March 12, 2021, the IRS provided updated instructions on their website for preparing returns that have excludable unemployment compensation.[1] However, on March 23, 2021 the IRS made a significant change in those instructions.[2] Originally the IRS instructions had taxpayers include the unemployment compensation in determining the modified AGI (reading “without regard to this section” in IRC §85(c)(2)(B) to mean without regard to the exclusion at IRC §85(c)) but now they have decided that means without regard to any unemployment compensation covered by §85" Are you kidding me When they first released the Instructions, I pulled up Page 1 of Form 1040, Schedule ! of Form 1040 and the newly published instructions and carefully followed them line by line and this was the exact result that I arrived at! Then the next day when the tax software providers started releasing their UCE worksheets, the total UC was included in the MAGI. Now it isn't included in MAGI! Whoa Nelly! At this rate there wan't even be a close second for Most Confusing Tax Season!!!

I was only half joking when I said a few weeks ago that we should all close our offices for a month, to let this all get sorted.

This is approaching the classic definition of a "Dumpster Fire"

https://www.currentfederaltaxdevelopments.com/blog/2021/3/23/irs-makes-a-significant-modification-to-computation-of-arpa-excludable-unemployment-compensation

According to several news articles, both the NCCPAP and the AICPA are pushing hard to get the IRS to extend the deadline for all forms and payments from April 15th to June 15th. They are saying the extension to May 17th wasn't very helpful, since it excluded Trusts, Corporations and all 1040 taxpayers who need to make quarterly estimated payments. I agree that at the very least the deadline extension to May 17th should have included all form and all payments. It didn't really help me since almost all of my returns are business related.

https://www.irs.gov/retirement-plans/ira-deduction-limits Check to make sure your client qualifies for a deductible Traditional IRA. Also, see if the Saver's Credit is available?

A Roth IRA contribution is not a tax deduction. Does he qualify to make a deductible Traditional IRA contribution?

Just when I was feeling excited that ATX had updated. Last year was the Season-that-just-won't-end. This year is just the Season from Hell. Dumpster Fire indeed.

New York State did something sensible (I am shocked, but hey I guess these things can indeed happen). They changed ALL their due dates for every type of return and payment to July 15th. No exceptions. Of course, the feds' date is earlier, but still. Sensible! Pick a date far enough in the future to matter, and make it across the board. Good for NYS for this.

I have asked every. single. client. Every. Single. One. So tired of this...

I don't have a lot of clients who filed for unemployment, but of those who did, I've prepared extensions as soon as the info came in. I don't intend to look at them again for at least 3-4 weeks.

Hopefully, your client just got traditional IRA sand the Roth IRA confused.

Please read the IRS instructions. You have basis in a security when you buy and proceeds when you sell.

MD did July 15th before the feds due to MD law changes in February (that they still haven't fully implemented).

Catherine, MN needs to do that too! They haven't even worked out which of the gazillion federal changes from last year we'll conform to. And the legislature is in session until around May 17th, so that's when they'll probably do something. Absolutely the feds and states need to match the Estimated dates to the return dates!

VA doesn't tax unemployment at all, and I think it's been this for a long time. MD is a new law, but has lower earnings limits (75k single, 100k MFJ & HOH) than the federal law, and it's a cliff. https://www.marylandtaxes.gov/RELIEFAct/docs/Maryland-Unemployment-Assistance-FAQs-FINAL.pdf

See "Medical Expenses" on pg 6 of pub 559

If this were simple, we would be in another line of work. Sad, but it is the reality of the business, those who make the laws/rules/reporting requirements are unlikely to ever had to deal with the consequences of their actions, and there is an entire industry which profits from complication. No different than any other trade though, some learn to do, some pay t get it done. When I was coming up, it was easy for someone to learn to fix their own auto, now, nearly impossible (and one city in CA is attempting to ban things like torque wrenches, air tools, and other things I have had for decades, from being used at home).

If the idiots who write the laws and the goons hired to enforce them don't know what they mean, how is anyone else suppose to?

already took care of it

Sorry, I thought my posts would be helpful for some. Since they are not, I took my posts down. Everyone should check with his or her clients' states dept of revenue websites and states legislation to determine proper handling of the unemployment income.

Just received this response to an email I sent to KY DOR yesterday. I think I will go ahead and make the adjustment as an addition back to AGI on Schedule M and turn loose of the ones I've been holding on to. The natives are getting restless. "RE: Income Taxes Inbox DOR WEB Response Individual Income Tax <[email protected]> 9:40 AM (8 minutes ago) to me Kentucky has not adopted legislation at this time for the $10,200 of unemployment not being taxed. If that legislation is passed, it will be posted on our website. As of now the income will need to be added to your Kentucky return as taxable on the SCH M. Thank you. XXXXXXXXX XXXXX, Section Supervisor Department of Revenue, Office of Income Taxation

It would be tolerable if I didn't do such volume.

The irs guidance issued last week was to not efile tax returns affected by the new law at this time.

Doncha just love the ones that answer "we got a debit card, but thought it was a scam and shredded it - now what do we do?" Right along with "I got a check and it got put in the recycling pile by accident - now what do I do?" At least those are a bit more creative than "I dunno."

Your thinking is correct. Taxpayer will need a qualified appraisal to determine the FMV. The client ends up as both the seller for the cash received and the donor for the excess of FMV over the selling price. Basis is prorated to between the portion sold and the portion donated. This has a pretty good summary of how it works: https://www.ccim.com/cire-magazine/articles/287370/2013/03/real-estate-gifting-realized-bargain-sales/

When figuring the following deductions or exclusions from income, if you are asked to enter an amount from Schedule 1, line 7 enter the total amount of unemployment compensation reported on line 7 (unreduced by any exclusion amount) and if you are asked to enter an amount from Schedule 1, line 8, enter the amount from line 3 of the Unemployment Compensation Exclusion Worksheet. See the specific form or instructions for more information. If you file Form 1040-NR, you aren't eligible for all of these deductions. See the Instructions for Form 1040-NR for details. Taxable social security benefits (Instructions for Form 1040 or 1040-SR, Social Security Benefits Worksheet) IRA deduction (Instructions for Form 1040 or 1040-SR, IRA Deduction Worksheet) Student loan interest deduction (Instructions for Form 1040 or 1040-SR, Student Loan Interest Deduction Worksheet) Nontaxable amount of Olympic or Paralympic medals and USOC prize money (Instructions for Form 1040 or 1040-SR, Schedule 1, line 8.) The exclusion of interest from Series EE and I U.S. Savings Bonds issued after 1989 (Form 8815) The exclusion of employer-provided adoption benefits (Form 8839) Tuition and fees deduction (Form 8917) The deduction of up to $25,000 for active participation in a passive rental real estate activity (Form 8582)

Sweet. But watch your state. California requires a manual adjustment on Schedule CA to bring back the excluded federal amounts. Tom Modesto, CA

From IRS website: Authorized IRS e-file Providers are prohibited from submitting electronic returns to the IRS prior to the receipt of all Forms W-2, W-2G, and 1099-R from the taxpayer. If the taxpayer is unable to secure and provide a correct Form W-2, W-2G, or 1099-R, the return may be electronically filed after Form 4852, Substitute for Form W-2, Wage and Tax Statement, or Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. is completed in accordance with the use of that form. This is the only time information from Pay stubs or Leave and Earning Statements (LES) is allowed.

Agree with POSSI. I like the answer I get every now and then. "I THINK SO" Well "think so" doesn't work around here.

Report sales price = basis ?

I misunderstood and picked up in the thread that you had decided to call it an investment and a capital loss. I don't think there is a method or any reason to report a nondeductible loss on the K-1; or for that matter on the 1041

thanks for all the comments. Always good to get other views.

Indiana- #35-6000158 INDIANA DEPARTMENT OF WORKFORCE DEVELOPMENT, 10 SENATE AVE, INDIANAPOLIS, IN 46204-2277 I copied this information from the link in the general chat that has been pinned at the top of the page and labeled All Pinned Topics - ATX Tips/Tricks, QBI, TCJAs, States' Info. Hope it helps. I think it is actuallyfor unemployment but it is the only one we have pinned.