Level 3

I was functioning under a misconception that NY had accepted the unemployment exemption passed by the Federal government.  I recall clearly visiting the NYS web site and at that time could find no conclusive statement about whether or not the exclusion would apply to NY or if NY would uncouple.   I electronically filed a NYS return for a client and it was accepted on 3/23/21.  The NYS return had a refund due to the client based on the exemption for unemployment income that ProSeries accepted when it was entered.  The client recently receive a letter from NYS adjusting her return, adding back in the $10,200 exemption and asking her to pay a resulting tax.  Subsequently I opened the client's NYS tax return in ProSeries to discover it had been corrected (after efile) to incorporate the unemployment income in full and calculate correctly the tax due.  Yes, I always print a copy of the tax return for my client and for my file before I efile and apparently that is a good practice. 

I revisited the NYS site and searched on-line to learn from an article from "Money" that as of April 7 the NYS Budget office continued to expected taxpayers to pay tax on the Federal exempted $10,200.  It took a bit of digging to determine.  I thought NY should have made that a feature for every individual taxpayer once the main NYS Tax & Finance page was opened.  I was disappointed that had not been made more clear to the common taxpayer from all sources.

I then reviewed other files I prepared for other clients with unemployment income after the Federal Act excluded the first $10,200.  A NYS return prepared and electronically filed on April 7 was correctly calculated.  Apparently NYS files submitted electronically at least between 3/23 and 4/7 should be reviewed when a client received unemployment income to determine if the calculation was correct on the NY return - so you can be proactive with the client and advise they will get a NYS adjustment. 

I am not happy that I spent a lot of money on software that is not effectively keeping the software up to date.  I know it has been an unusual tax year.   I know that ultimately the preparer is responsible for knowing about new legislation.  I belong to a tax preparer association and rely to some degree on updates from the association.  Nevertheless, certainly ProSeries Tax would have a closer, more timely connection to IRS and States than the common tax user. I have a small practice and am a single practitioner.  I run the ProSeries product updates regularly.  I always open and review the file one last time before I electronically file and rely on the program advising that the "Return ready to EF".  I do pay attention to changes and was attempting to be up to date but in part also relying on the software to be up to date. This was an unsettling situation.  

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