The American Rescue Plan Act of 2021 excludes from income the first $10,200 in unemployment compensation received in 2020 per taxpayer on their 2020 tax return. The new provision applies to taxpayers with an AGI of less than $150,000. The IRS has recently released a new unemployment compensation exclusion worksheet and updated instructions on how to file 2020 tax returns that contain unemployment income.

The exclusion amount calculated on the worksheet flows back to Schedule 1 (Form 1040), line 8. UCE will print on the line next to line 8 identifying the amount as the unemployment compensation exclusion.

• Please note that this change can have significant impacts on your state return. We are in the process of working through the states and making any modifications needed to handle the new federal changes based on the state laws as we know them today.  We STRONGLY recommend you pay close attention to the state portion of the return.  If you find any issues or have any concerns please reach out to VITA/TCE support with a detailed explanation and an example return.
• Create a return tag if you choose to hold the state portion of the return to file once your state has made a decision on whether it will conform or not to the federal changes.

Returns filed prior to the release of the Federal Update in TaxSlayer Pro will automatically re-calculate to exclude the non-taxable portion of unemployment income. This is important – Please make sure you have a copy of the originally filed federal and state return before you open these returns. The original copy of the federal tax return and the state return will be needed to plug in the original column on the Amended federal and state forms once the IRS gives guidance on if or when an amended return needs to be filed. The original return can be accessed from Client List by using the Tools dropdown to access “Client Status”. Scroll down the Client Status page to locate the Federal transmission. The left print icon, when clicked, will open a new window that includes the original Federal transmission.

• We are aware the State PDF is not generating in Client Status and have this defect reported to development (Issue 5952).

3/31/21 – This has been resolved.

We have opened Issue 5883 to address an issue where Part-Year and Nonresident OR returns are breaking the calc inside a return. Resident OR returns do not appear to be impacted.

The information on the following link is updated as we get information from the state regarding how they will handle the unemployment provision of the American Rescue Act.  This is a “living document” that changes as the states put out updated information.

Click here for State Information

We received the below message from VT when asked if they were experiencing any issues in sending acks. As additional information is provided, we will update this post.

3/19/2021

Update from Colorado.

“Our developers are testing the solution for the MeF acknowledgments that were not generated and sent for a few days earlier this month.  Hopefully the solution will be migrated this evening and acks will be brought current.  We apologize for the inconvenience this has caused you and your customers.”

We received the below statement from CO when we asked if they may be experiencing issues in sending acknowledgements. We will post additional updates as they are received.

“We discovered yesterday that some submissions were processing without creating and sending acks.  Our developers are testing a solution.“

3/8/21

MO has resolved the issued on their end. For any MO returns rejected with Reject Code MO1040-0022, they can be resubmitted at this time.

We have opened Issue 5631 regarding MO Reject Code MO1040-0022 which states, “Taxable Social Security reported on Form MO-A, Part 3, Section A, B, and C is not equal“. MO has indicated this is an issue on their end and will notify us when this issue has been resolved. At this time, if you have any impacted MO returns with this reject code, please do not resubmit until this blog post has been updated.

A fix to Business Rule MO1040-0022 will go into production Saturday evening.  Please let me know if there any continued issues after that time.

We are also working on an update to Business Rule MO1040-0012.  We expect to have this in production by mid-week next week.

Once MO has these changes in their system, you will be able to resend any of your state returns rejected for these reasons.

Note:  You can resend MO1040-0022 beginning Sunday

We will notify you when you can resend MO1040-0012

3/2/21

“We expect to have the backlogged submissions fully cleared by COB Wednesday.”

The below was received from New Mexico regarding delays in issuing acknowledgements.

“For the first week after the IRS opening, New Mexico typically throttles incoming submissions. This does mean that it will take more time than usual to clear our pending queue, and to get acknowledgments out the door. We would expect to have the backlog cleared by early next week, and any pending acknowledgments should have gone out by that point.“