unemployment compensation exclusion

[dperhogan]

I have a client who is still waiting for the IRS to process their unemployment compensation exclusion adjustment to the tax return.  The client originally had a balance due but with the UCE adjustment has a refund.  The IRS notices said not to file an amended return for the UCE adjustment because the IRS will process the the adjustment and send taxpayers the adjusted amount on their return.  The IRS is sending my client letters for the balance due.  I called the IRS and talked to an agent who determined my client is eligible for UCE but said the adjustment hasn't been processed yet.  Is anyone else still waiting for IRS to process clients UCE adjustment?  Should I have my client pay the balance due and file an amended return for the UCE adjustment? 

[Just-Lisa-Now-]

Well, this was posted in another group Im in, this guy works for IRS and has been manually reviewing returns for UCE...this was the last I saw him say about it when someone asked if we should amend yet if IRS hasnt corrected on their end.... that was on Oct 18th:

"well, we haven't done the few returns that have a scheduled j yet either, those have to be done by hand because we don't want to program it. And there are several other reasons that could be holding things off, like they had an estimated tax penalty. Also an extremely high percentage of people made a negative entry on schedule 1, line 8, and either filed a paper return or didn't put any text explaining what the amount was, and some put something that was indecipherable or not clear whether it was them claiming the uce or not. So for all those we can't do them, because they claimed a negative amount on schedule 1 line 8 we can't tell whether it was their uce or not. If we can't tell that a negative amount is not the uce, then yes definitely amend now. If you have uncommon stuff like 8615, Sch J, ES penalty (which you should never, ever self-assess, unless you are figuring a lower amount than the IRS would), then wait."

[qbteachmt]

You might want to bookmark this page:

https://www.irs.gov/newsroom/2020-unemployment-compensation-exclusion-faqs-topic-g-receiving-a-refun...

For instance: "We will send a notice when your account is corrected for the unemployment compensation exclusion. The notice will be mailed to the address we have on file for you. Usually, a notice of adjustment is received within 30 days of when the correction is made. Please keep this notice for your records."

Did your client get this notice?

"The client originally had a balance due but with the UCE adjustment has a refund."

But never paid? Because, yes, you are still supposed to pay. And no, they tell you not to also amend.

[qbteachmt · Accepted solution]

Here's an article with an update, dated Nov 1:

https://www.irs.gov/newsroom/irs-issues-another-430000-refunds-for-adjustments-related-to-unemployme...

They are still working on it.

[dperhogan]

Client didn't receive any notice yet.  I will instruct them to pay and wait for IRS to process the unemployment compensation exclustion adjustment.

Thanks for the info.

[BobKamman]

Why would someone pay taxes they don't owe?  Sounds like something left over from the days of Stalin.  File the amended return, and send a copy of it back to the address on any notice the IRS computer spits out.  There are still a few people left at IRS who know how to freeze an account for enough cycles to avoid another bill before the return is processed.  (Otherwise, when the opportunity arises ask for a CDP hearing -- that will stop the notices for another six months.)  

[PATAX]

Have client that is still waiting for a refund from this adjustment... He had a refund on original return which they received but not the uce adjustment refund... I don't recall anything complicated on return or what was mentioned here to delay this.... I wonder if the refund will be flushed through the system when I file the 2021 return, i.e. the uce adjustment refund will be added to their 2021 refund?...

[Just-Lisa-Now-]

Im thinking if they haven't adjusted by the time you file 2021, then amend for it....should be able to EF the amendment.

[dperhogan]

My client from the initial post on 11-26-21 11:01am still hasn't received their refund from the UCE adjustment.  Does anyone else have clients still waiting for the IRS to process the UCE adjustment?  The only change in the scenario is the client has moved and sent a change of address form to the IRS.  Is it time to file amended return?

[qbteachmt]

Has your client checked the "Where's My Refund?" portal; or at least, checked to see the status of their return? Don't amend something, until you know you need to file a change.

Yes, there are millions of 2021 returns not yet processed. It's been all over the national news and the IRS keeps including this in their e-newsletter delivery to your email inbox, if you subscribe.

[BobKamman]

This is the IRS online update from yesterday:

Status of Unemployment Compensation Exclusion Corrections: The IRS continues to review tax year 2020 returns and process corrections for taxpayers who paid taxes on unemployment compensation, to exclude the compensation from income if eligible. To date, the IRS has issued over 11.8 million refunds totaling $14.5 billion. The IRS is now concentrating on more complex returns. Some taxpayers will receive refunds, while others will have the overpayment applied to taxes due or other debts. The IRS will mail a letter to affected taxpayers to inform them of the corrections, generally within 30 days from when the corrections were completed. 

https://www.irs.gov/newsroom/irs-operations-during-covid-19-mission-critical-functions-continue

I have clients who filed superseding MFS returns for larger refunds based on excluding UC because income was below the cutoff amount.  IRS has processed the wife's return but did not split the withholding (community property state) so sent her a bill for $1,000 instead of a check for $3,000.  They are still working on the husband's return -- it shows up at "Where's My Refund," as still being processed.  I wonder how much longer that will be available, once 2021 return refunds start being posted.  Will they split the withholding on his return?  Wait and see.