Filed taxes already- questions

[keyslover]

We have filed with TT before the Stimulus Package was passed.

With the new child tax credits and who knows what else, do we need to do anything? Will will need to amend?

[ohgillian]

The change to the child tax credit is for tax year 2021. So no changes to your 2020 filing for that.

But for people who got unemployment this past year, it's a different answer. The law gives a $10,200 income exclusion per person for unemployment payments -- or said differently, you don't have to count the first $10,200 as income for tax purposes. That change is effective for tax year 2020, so I am guessing that folks to whom that applies are going to need to file an amended? That's a guess. Hopefully some of our more knowledgeable tax folks will weigh in.

I would say that it's too early to file an amended, but that's just my opinion. Other changes could happen, and esp at the state level, not all states have acted yet as to whether to conform with the federal changes.

[seeyalater52]

Mar 14, 2021 10:01:16 GMT -5 ohgillian said:

The change to the child tax credit is for tax year 2021. So no changes to your 2020 filing for that.

But for people who got unemployment this past year, it's a different answer. The law gives a $10,200 income exclusion per person for unemployment payments -- or said differently, you don't have to count the first $10,200 as income for tax purposes. That change is effective for tax year 2020, so I am guessing that folks to whom that applies are going to need to file an amended? That's a guess. Hopefully some of our more knowledgeable tax folks will weigh in.

I would say that it's too early to file an amended, but that's just my opinion. Other changes could happen, and esp at the state level, not all states have acted yet as to whether to conform with the federal changes.

Ohhhh I didn’t pick up on the fact that the unemployment tax piece was for 2020. I’ll have to keep my eye on this. I’m not sure if it’s worth the hassle to amend (we filed using TT, is there a fee to amend taxes?) but we did pay a decent amount for UI taxes at the state and federal level so it might be worth it.

[keyslover]

Mar 14, 2021 11:54:58 GMT -5 seeyalater52 said:

Mar 14, 2021 10:01:16 GMT -5 ohgillian said:

The change to the child tax credit is for tax year 2021. So no changes to your 2020 filing for that.

But for people who got unemployment this past year, it's a different answer. The law gives a $10,200 income exclusion per person for unemployment payments -- or said differently, you don't have to count the first $10,200 as income for tax purposes. That change is effective for tax year 2020, so I am guessing that folks to whom that applies are going to need to file an amended? That's a guess. Hopefully some of our more knowledgeable tax folks will weigh in.

I would say that it's too early to file an amended, but that's just my opinion. Other changes could happen, and esp at the state level, not all states have acted yet as to whether to conform with the federal changes.

Ohhhh I didn’t pick up on the fact that the unemployment tax piece was for 2020. I’ll have to keep my eye on this. I’m not sure if it’s worth the hassle to amend (we filed using TT, is there a fee to amend taxes?) but we did pay a decent amount for UI taxes at the state and federal level so it might be worth it.

Not sure the answers to you questions. But with regard to the Unemployment- I know some states are working on that issue as well. So, I'd see what your state has going on before doing anything.

[sicilygirl]

Mar 14, 2021 11:54:58 GMT -5 seeyalater52 said:

Mar 14, 2021 10:01:16 GMT -5 ohgillian said:

The change to the child tax credit is for tax year 2021. So no changes to your 2020 filing for that.

But for people who got unemployment this past year, it's a different answer. The law gives a $10,200 income exclusion per person for unemployment payments -- or said differently, you don't have to count the first $10,200 as income for tax purposes. That change is effective for tax year 2020, so I am guessing that folks to whom that applies are going to need to file an amended? That's a guess. Hopefully some of our more knowledgeable tax folks will weigh in.

I would say that it's too early to file an amended, but that's just my opinion. Other changes could happen, and esp at the state level, not all states have acted yet as to whether to conform with the federal changes.

Ohhhh I didn’t pick up on the fact that the unemployment tax piece was for 2020. I’ll have to keep my eye on this. I’m not sure if it’s worth the hassle to amend (we filed using TT, is there a fee to amend taxes?) but we did pay a decent amount for UI taxes at the state and federal level so it might be worth it.

Two notes: The unemployment is only tax-free if you make less than $150,000/year. And, depending on which state you live in, you might need to wait to amend until you state determines if they are conforming with this law.

[seeyalater52]

Mar 14, 2021 12:55:05 GMT -5 sicilygirl said:

Mar 14, 2021 11:54:58 GMT -5 seeyalater52 said:

Ohhhh I didn’t pick up on the fact that the unemployment tax piece was for 2020. I’ll have to keep my eye on this. I’m not sure if it’s worth the hassle to amend (we filed using TT, is there a fee to amend taxes?) but we did pay a decent amount for UI taxes at the state and federal level so it might be worth it.

Two notes: The unemployment is only tax-free if you make less than $150,000/year. And, depending on which state you live in, you might need to wait to amend until you state determines if they are conforming with this law.

Thanks! Yes, we’d qualify but I know our state hasn’t decided whether to conform yet, so we’d definitely need to wait. I might run it that way once it’s in the system and see how it comes up and whether it’s worth it to amend.

[ohgillian]

Mar 14, 2021 13:01:53 GMT -5 seeyalater52 said:

Mar 14, 2021 12:55:05 GMT -5 sicilygirl said:

Two notes: The unemployment is only tax-free if you make less than $150,000/year. And, depending on which state you live in, you might need to wait to amend until you state determines if they are conforming with this law.

Thanks! Yes, we’d qualify but I know our state hasn’t decided whether to conform yet, so we’d definitely need to wait. I might run it that way once it’s in the system and see how it comes up and whether it’s worth it to amend.

Looks like people might not need to refile, at least at the federal level.


www.wsj.com/articles/unemployed-workers-may-not-need-to-amend-returns-for-tax-break-11616095698 

[jlt19]

Mar 14, 2021 12:55:05 GMT -5 sicilygirl said:

Mar 14, 2021 11:54:58 GMT -5 seeyalater52 said:

Ohhhh I didn’t pick up on the fact that the unemployment tax piece was for 2020. I’ll have to keep my eye on this. I’m not sure if it’s worth the hassle to amend (we filed using TT, is there a fee to amend taxes?) but we did pay a decent amount for UI taxes at the state and federal level so it might be worth it.

Two notes: The unemployment is only tax-free if you make less than $150,000/year. And, depending on which state you live in, you might need to wait to amend until you state determines if they are conforming with this law.

Yes, and it's your AGI, not taxable income, and you have to take the AGI into account WITH the unemployment income first. And it falls off after $150,001. Which I am SO upset about. Our AGI is literally $150,451 and I was unemployed for four months.

I got a settlement from my last employer, which is what made it so much higher than usual and no taxes were taken out. The employer paid it directly to the attorney, who JUST issued me a 1099-NEC after I have been asking them WTF I'm supposed to do for 2 months now. I paid the attorney upfront, and I soooo wish I would have had it taken out of the settlement instead b/c then we'd be below the AGI. 

And I know that we are fortunate enough to have made that much, and I kept back a portion of the settlement b/c I knew we'd owe taxes on it, but seeing that our bill could be almost $3,000 less than it currently is, b/c of $451, is really a kick in teeth. 

And now i'm also curious how this will affect the stimulus. Since I haven't filed yet, I guess it'll still be off our 2019 numbers which are well below the $150k limit but, since 2020 will be over, I don't know if we'll owe some back or not. 

[sometimesrunner]

Mar 19, 2021 8:54:38 GMT -5 jlt19 said:

Mar 14, 2021 12:55:05 GMT -5 sicilygirl said:

Two notes: The unemployment is only tax-free if you make less than $150,000/year. And, depending on which state you live in, you might need to wait to amend until you state determines if they are conforming with this law.

Yes, and it's your AGI, not taxable income, and you have to take the AGI into account WITH the unemployment income first. And it falls off after $150,001. Which I am SO upset about. Our AGI is literally $150,451 and I was unemployed for four months.

I got a settlement from my last employer, which is what made it so much higher than usual and no taxes were taken out. The employer paid it directly to the attorney, who JUST issued me a 1099-NEC after I have been asking them WTF I'm supposed to do for 2 months now. I paid the attorney upfront, and I soooo wish I would have had it taken out of the settlement instead b/c then we'd be below the AGI. 

And I know that we are fortunate enough to have made that much, and I kept back a portion of the settlement b/c I knew we'd owe taxes on it, but seeing that our bill could be almost $3,000 less than it currently is, b/c of $451, is really a kick in teeth. 

And now i'm also curious how this will affect the stimulus. Since I haven't filed yet, I guess it'll still be off our 2019 numbers which are well below the $150k limit but, since 2020 will be over, I don't know if we'll owe some back or not. 

Ugh, that's rough. Do you happen to have access to an HSA that you can put money into? Are you eligible for a traditional IRA contribution? 

[smock]

Ugh [mention]jlt19 [/mention] we are in a similar boat. Mr. Smock has been unemployed for a year and his UI training benefits pushed us over the new limit for the UI tax rule AND for the stimulus payments. Because of temporary UI that will end in May. We're doing okay financially because I've been pushing myself like crazy with my job. I'm starting to wonder why Joe Manchin hates me. 😭

But in your situation, I'd see if you can get below that threshold with HSA, IRA, or maybe charitable contributions? I think last spring's Covid bill let married couples donate $600 to charities as a tax credit, which would get you below that threshold. Or can you defer compensation on something?

[ohgillian]

jlt19, UGHHH. I would not have any problem reaching out to the attorney and asking if you could re-do the transaction to pay them out of the settlement instead. Even if you need to pay them to re-do the transaction, you'd still be ahead presumably. Or, yes, all the things other people have mentioned. I mean I know that there has to be a cap somewhere, but it's super annoying when you are *just* on the other side of the line.

[jlt19]

smock sadly (?) it's only $300 per couple too. And that's already been accounted for.

ETA: Never mind, since we both have 401ks and our AGI is over $125k, we can't deduct anything. Glad I didn't go through the work of opening a traditional one...

sometimesrunner

I didn't max out my Roth last year. Can you have both a Roth and Traditional? Could I open a traditional now, with whatever I have left to my max, and account for it on 2020's taxes since it's before 4/15?

I won't get insurance with my new job until April 1 (but I can't even sign up for it until that day b/c I lose the old insurance 3/31). I WILL have an HSA then. Does it work similarly to an IRA, where you can make contributions for the prior year? It probably won't be set up before the 15th though, and probably not if it wasn't even open in 2020, which could be a problem for the regular IRA too

ohgillian I would but her and her office have been such a nightmare through this. I paid the retainer in January 2020, settlement was February 2020, *I* had to reach out in April 2020 for an invoice to see if I was owed any money back (I was). Ok, it was Quarantine time, whatever.

I started reaching out to her office mid February 2021 for some sort of paperwork for taxes. Got a form this week after numerous emails and phone calls. They're a mess. I'm mad at DH's friend for referring me to her!

[mainelyfoolish]

Mar 19, 2021 15:31:52 GMT -5 jlt19 said:

I didn't max out my Roth last year. Can you have both a Roth and Traditional? Could I open a traditional now, with whatever I have left to my max, and account for it on 2020's taxes since it's before 4/15?

Yes, but...if you and your husband were covered by retirement plans at work, your AGI is too high to make a deductible contribution. Read this publication: www.irs.gov/pub/irs-pdf/p590a.pdf

[sicilygirl]

jlt19 The IRS revised their worksheet published last week to exclude unemployment income when calculating your MAGI, so it looks like you should now qualify to exclude up to the $10,200 max of unemployment benefits from your income.

www.irs.gov/forms-pubs/new-exclusion-of-up-to-10200-of-unemployment-compensation

smock just in case this helps you too.

Also seeyalater52 , The IRS has also said that if you filed your return before this law was enacted not to amend but rather wait for additional guidance. They may process a refund for you without you having to deal with an amended return.

ETA: One more thing!  jlt19 This may be irrelevant now but for anyone else who may see this... If the IRS sends you a stimulus check based on a prior tax return filed and your income increases in the year that the recovery rebate credit actually applies to, you will not have to pay anything back.  You get to keep the money.  Just an FYI.

[jlt19]

Mar 24, 2021 18:56:58 GMT -5 sicilygirl said:

jlt19 The IRS revised their worksheet published last week to exclude unemployment income when calculating your MAGI, so it looks like you should now qualify to exclude up to the $10,200 max of unemployment benefits from your income.

www.irs.gov/forms-pubs/new-exclusion-of-up-to-10200-of-unemployment-compensation

smock just in case this helps you too.

Also seeyalater52 , The IRS has also said that if you filed your return before this law was enacted not to amend but rather wait for additional guidance. They may process a refund for you without you having to deal with an amended return.

ETA: One more thing!  jlt19 This may be irrelevant now but for anyone else who may see this... If the IRS sends you a stimulus check based on a prior tax return filed and your income increases in the year that the recovery rebate credit actually applies to, you will not have to pay anything back.  You get to keep the money.  Just an FYI.

OMG you are my new best friend! Thank you for updating me on this!

[smock]

Thanks sicilygirl! I think we're still over the threshold if they're using MAGI instead of AGI, since my income is all self-employment income, and MAGI includes one half of self-employment taxes, non-taxable retirement contributions, and self-employed health insurance costs. If I'm reading the IRS instructions correctly.

Either way, I'll just hold tight and see if the IRS gets in touch, I guess. Maybe I'll have a surprise July refund to look forward to?

[smock]

Wait, WAIT, if I'm understanding the IRS instructions correctly, we're below the threshold! So maybe we'll be able to deduct some taxes. Does anyone know if this new AGI calculation also affects the eligibility for stimulus payments? Or is that still based on income including UI payments?

ETA: For anyone else in this situation, it looks like the IRS will not count unemployment income when determining the eligibility for stimulus checks. Which is great news for the Smock household.

www.nj.com/coronavirus/2021/03/stimulus-check-update-more-people-will-be-eligible-for-1400-payment-due-to-unemployment-tax-change.html