Unemployment Compensation Exemption

[tscott1205]

Proseries changed my "final copy" of clients tax return where client received unemployment without me manually making the change. I did not know Proseries would do this. I have returns that were efiled differently than what my signed 8879 reflected.  I have worked with proseries for 10 years and to my knowledge they have never done this before. Why would Proseries change my return without alerting me that they did this. Once I printed the return I did not open that return again. So Proseries must have made the change (own its own) when the return was efiled. Has anyone else experienced this.

[IRonMaN]

"I have worked with proseries for 10 years and to my knowledge they have never done this before."

They have always done this.  If there is an update after the return was filed, the system will use the most recent update to calculate the tax.  Most of the time updates don't affect the tax, but backing off $10,200 of income at a time will definitely create a change in tax. 

[George4Tacks]

This has happened over the ages. It is very important to be sure that the 8879 you have in hand matches the results that are being sent. 

I case you had not noticed, IRS issued a worksheet to figure the UI. Then a week later they issued a corrected worksheet to figure the UI. 

Sign up to keep informed https://www.irs.gov/newsroom/e-news-subscriptions 

[dkh]

This year has been a good example as to why you should always have a printed copy or pdf of a return as it was when efiled.        What you are seeing in the return now is happening automatically due to program updates. You will need to determine if the program changes for unemployment happened before or after the returns were efiled.      And may I suggest you have new procedures in place to prevent this from happening.    I do not  allow a return to efile until it is marked "Return ready to EF" .   I do not mark a return "Return ready to EF" until I have matched the signed 8879 with the refund/balance due in the program.  Checks and balances to prevent a potentially embarrassing and costly situation.

[PaulaB]

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.  

[IRonMaN]

"I know it has been an unusual tax year"

In Intuit's defense (and I don't do a lot of defending of Intuit), there were masses ready to riot Intuit headquarters because they weren't moving fast enough to update the federal unemployment exclusion.  So they finally got that done to stop the rioting.  But each state approaches things like unemployment separately so there was no way for them to do a blanket update for the state handling of the exclusion.  We were on our own and it really is up to us to decide if it is safe to go back in the water when dealing with our own states.  I knew my state wasn't in tune with the exclusion so I put my toes in the water before I jumped into the deep end of the pool.  Depending on the state involved, for some of those that jumped in head first, their state played along and they lucked out.  For those that made the big dive without verifying the state side of things, hopefully they were wearing their life preserver or can swim really well.

[BobKamman]

"I am not happy that I spent a lot of money on software that is not effectively keeping the software up to date."

Google News is free, and should be used to keep up to date on federal and state tax laws.  Filing a return in anticipation of legislation is ... what's a good word?  Sad?

[qbteachmt]

@PaulaB 

Bookmark this and Refresh it often:

https://www.tax.ny.gov/pit/cares-act-faq.htm

NY has "rolling conformity" and they are keeping their websites updated very well.

"Under longstanding New York State law, unemployment compensation is subject to tax, which means you should report the full amount of unemployment compensation on your New York State personal income tax return. If you exclude unemployment compensation on your federal return, as allowed under the American Rescue Plan Act of 2021, you must add back the excluded unemployment compensation on your New York State return.

Form IT-558, New York State Adjustments due to Decoupling from the IRC, has been updated to report this add-back as adjustment code A-011. See Personal income tax up-to-date information for 2020 (Articles 22 and 30).

If you have not yet filed your 2020 New York State return, and file using software, the software should already account for this update and add back the unemployment compensation excluded from federal gross income. If you do not file using software, make sure to add back the federal unemployment compensation exclusion.

If you already filed your 2020 New York State return, and you did not add back unemployment compensation that was excluded from your federal gross income, then you must file an amended return with New York State. If you did not exclude unemployment compensation from your federal gross income, do not file an amended return with New York State."

And even with Filing Dates making a difference, for those who filed before a software update, and those who filed after one...

https://www.nysenate.gov/newsroom/press-releases/james-tedisco/media-alert-tedisco-bring-bi-partisan...

"Media Alert: Tedisco to Bring Bi-Partisan Bill for Tax Break for New York’s Jobless to Senate Floor

James Tedisco

March 31, 2021

Senator Tedisco, Senate Republican Conference to offer amendment on Senate Floor to exclude $10,200 unemployment benefits from NYS taxable income, as federal government has done, to help ease economic burden caused by pandemic

Today at 3 p.m., during the NYS Senate Session, Senator Jim Tedisco (R,C-Glenville) will offer a bi-partisan bill as an amendment on the Senate Floor a bi-partisan bill to exclude unemployment benefits from taxable income for those impacted by the pandemic, to be consistent with the federal government.

You can view the Senate Session starting at 3 p.m. by clicking here.

Last week, after Tedisco’s prodding, the Governor moved New York State’s income tax deadline from April 15^th to May 17^th to be in line with the federal government. However, the Governor has refused to follow the federal government’s lead and exclude the first $10,200 of unemployment benefits from 2020 taxable income. 

Tedisco and the Senate Republican’s amendment on the Senate Floor is legislation sponsored by Senate Majority member Senator Simcha Felder, Senate Bill S.5125A.

According to the Department of Labor, 4.6 million New Yorkers received unemployment and pandemic unemployment benefits since the start of the COVID-19 pandemic last year. The $10,200 in tax relief in this measure would cover 17 weeks of the $600 per week unemployment benefit. California, New Jersey, Oregon, Delaware, Pennsylvania and Virginia exempt unemployment insurance benefits.'

(So does Montana)

"I am not happy that I spent a lot of money on software that is not effectively keeping the software up to date."

So, put blame on Legislators for not doing their jobs in a timely fashion.

[PaulaB]

Thanks for all of the feedback.  I did do my own research earlier and then more recently and found little that was very clear, direct or helpful.  I also found form IT-558 and instructions on the NYS web site.  I certainly understand the challenge Intuit experienced trying to get all tax updates done quickly and correctly.  I think my original message acknowledged these impediments.  Nevertheless it is hard for me to understand why I could submit a return on March 21 through Intuit, have it accepted by NY on March 22, have the client receive a letter by mail dated March 31 disagreeing and correcting her return and then shockingly finding the corrected IT-201 in my software when I opened the return after the client contacted me.  I felt like the client and I were left out of some insiders' information.  Oh, well - I'm done.  

Mostly I posted this hoping to have some impact of Inuit itself, since I find that it provides so little customer service.   

[qbteachmt]

"and then shockingly finding the corrected IT-201 in my software when I opened the return after the client contacted me."

I've been following the NY links since early Feb, and they have described it as Rolling Conformity the entire time. And the State updates to your program happened after you already filed; you told us that, so that is not a shocking surprise. It's what happens, and this year's filing season is worse than last.

If you filed Feb 12 for Fed, you beat Congress. That's the issue here.

[George4Tacks]

@PaulaB Have you ever used the LOCK feature? https://proconnect.intuit.com/community/banking/help/new-for-tax-year-2017-proseries-return-locking/...