Important FTB updates for UI recipients and IHSS workers - Spidell

Important FTB updates for UI recipients and IHSS workers

Unemployment insurance (UI) recipients

The FTB has announced that it will automatically adjust California returns for taxpayers who received UI benefits, to reflect the reduced AGI as a result of the $10,200 UI exclusion on the federal return. The reduced federal AGI may impact a taxpayer’s eligibility for the Earned Income Tax Credit (EITC), Young Child Tax Credit, and the $600 Golden State Stimulus Payment.

If a taxpayer has already filed a 2020 tax return and claimed the EITC and reported UI benefits on their return, the FTB will automatically make the adjustment. If the return was filed prior to March 11, 2021, and the taxpayer is entitled to a larger refund, the additional refund will be issued starting in August 2021.

If the taxpayer received UI benefits but did not claim the EITC and their federal AGI is less than $40,201 ($50,401 MFJ), taxpayers may complete a Form 3514 (if they are otherwise eligible), and submit it to the following address. An amended return is not required. Submit the form to:

Franchise Tax Board
PIT Correspondence
P.O. Box 942840
Sacramento, CA 94240-0040

More details are available at:

EITC for IHSS workers

Last month, the OTA issued a precedential decision in Appeal of Akhtar, 2021-OTA-118P, in which it held that IHSS workers living with the person they are caring for may treat their IHSS wages as earned income for purposes of the EITC, even though these wages are excludable from gross income. The ruling applies to all open tax years, and taxpayers should file protective refund claims. The deadline for applying for a 2016 protective refund claim is May 17, 2021, for timely filed returns.

The FTB is currently revising Form 3514, California Earned Income Tax Credit. Affected taxpayers may claim the EITC for 2017–2020 by submitting the revised Form 3514 without filing an amended return.

Details about how to file the 2016 protective refund claim or the 2017–2020 EITC credits are available at:

Attend Spidell’s 2021 Post-Tax Season Update and Review webinar and get answers to questions about the UI exclusion, AB 80, and more, so you can finalize returns. Click here and register now.