bypass Unemployment Deduction

[lukechandler]

Does anyone know how to bypass the new Unemployment deduction of $10,200 that came w/ the newest update? I have a client who had tax deducted from his unemployment, but Proseries won't let me efile the return because the refund amount is now higher than his income after the $10,200 was deducted. Its telling me I need to mail in the return. Since the standard deduction is greater than my client's total unemployment, it makes sense to just include the entire amount as income, since he won't be taxed on it anyways. I can't find a way to override that.

[qbteachmt]

"I have a client who had tax deducted"

The change is for Exclusion, not Tax deduction.

And it doesn't change all of the computations.

https://proconnect.intuit.com/community/proseries-tax-discussions/discussion/re-another-new-unemploy...

If you intend to file it "incorrectly" then do not deduct that amount. File it "as is" and let the IRS fix it.

[lukechandler]

I meant to say tax was withheld from his unemployment

[lukechandler]

So my question should be how to bypass the Unemployment Exclusion (UCE)

[Just-Lisa-Now-]

So your issue is that now you have a tax return that has more federal withholding than it does income so its not able to be Efiled.    Thats an IRS limitation. 

I have the same issue with returns that have large NOLs that wipe all the income out, but they have withholding from W2 income, we end up having to paper file.

I guess a workaround could be to input some hobby income that makes their income exceed the federal withholding amount, that wouldnt create any tax liability but would allow Efiling.

[lrhenry04]

Did you try to e-file with error checking? You can sometimes get returns to go through even though an error is shown.

From EF Homebase view, select the return to file and EF Now. When the Electronic Filing Option box appears, uncheck "Enable conversion error checking". 

Let us know how that goes. I think I have some with this error but I haven't filed them yet.

[pamdory]

In Lacerte we have to check a box to apply the provisions of the American Rescue Plan.  This box has to be checked on each client.  If I don't check it on a client with Unemployment  income I get an informational diagnostic, but it leaves the unemployment in income.

I don't know if ProSeries has the same thing, but that is a way to deal with this in Lacerte.

[TaxGuyBill]

Just to be clear ... you are asking how to falsely add thousands of dollars of taxable income to the tax return, just so you can e-file it instead of mailing it?

[lrhenry04]

OP stated that the total income is less than standard deduction so it wouldn't matter either way. Refund stays the same and e-filing takes away the need to paper file and the 8-10 months of processing time.

[BobKamman]

The unemployment exclusion is not an election; the law says it "shall" be used. 

Are you asking if you should apply common sense to an IRS programming glitch?  That's not how it works around here.  When IRS says jump, we ask how high.  

But electronic filling does not mean automatic acceptance. Many of the 7 million returns left over from last year were filed electronically.  If IRS has a filter to prevent acceptance, it may also have a filter that requires review when the only withholding is on a 1099-G that they say they won't have available until after March 31 anyway. 

A paper return might be the fastest route to a refund.  Let us know how it turns out.  

[qbteachmt]

Would your taxpayer client be upset to later learn they don't qualify for something or are otherwise affected because a tax filing shows that amount as income, due to a false filing in an attempt to bypass that this is supposed to be unearned and nontaxable? There are plenty of things in life that use a lookback for determination.