New Twist on Unemployment Amended Returns

[BobKamman]

Client received about $3,000 unemployment, and filed return before exclusion was enacted. But he had a solar credit carryover that reduced his tax to zero. Now, he just has a larger carryover to his 2021 return.

It’s unlikely that he will use up the credit for at least another three or four years – and maybe, never.

Part of his Social Security was taxable, but that doesn’t change anyway, right?

Would you just adjust the carryover on the 2021 return, and figure IRS won’t notice? Or would you amend 2020 claiming zero refund but less credit and more carryover?

[dkh · Accepted solution]

If it was my client's return -  I would adjust the carryover on the 2021 return.  I'd do this based on              IR 2021-71 -- IRS says not to file amended return unless the exclusion of unemployment made the taxpayer eligible for tax credits and deductions not already on the return.   

I don't know anything about IRS computer system but I have my doubts that it tracks a taxpayers energy credit carryover

I'd prepare the amended return for my file and call it good.

[BobKamman]

If the tax amount involved was more like $3,000, not $300, I would probably file the amended return. (We have the same situation with the state return.) But I think I’ll just try to attach an explanation to the 2021 return, explaining the change in credit carryover amount.

Sometimes IRS surprises me, with the data they roll over from year to year. Don’t they track how many years the AOC credit has been claimed? Or maybe that’s just the software. And then there are the people who are still paying back the new home credit from a generation or so ago. Just when the last of those are gone, they’re talking about bringing it back.