My employer paid me unemployment benefits directly, but Turbo Tax isn't deducting the taxes that have been waived on the first $10,200. How do I get this credit?

Unfortunately, the recent law that exempts unemployment benefits from federal tax only applies to benefits paid through state and federal unemployment insurance programs - it does not apply to payments from employers made in lieu of unemployment benefits.

In order to qualify for the recent tax exemption, payments must be reported on ​​​​​ Form 1099-G Certain Government Payments.

Since your employer reported this income on Form 1099-MISC and did not withhold taxes (income, Social Security & Medicare), you will have to report it as "self-employment" income. This method is necessary in order to properly calculate and report your tax obligations. You will have to pay both your personal share of employment taxes (Social Security & Medicare) and your employer's share. 

Enter the 1099-MISC in the Income from 1099-MISC interview in Other Common Income.

• Type "1099 misc" in the search window 

• Click on "jump to 1099 misc" 

• Enter the information from your Form 1099-MISC, and click on Continue 

• Enter a description and click on Continue 

• Answer "Yes..." to "Does [Unemployment replacement] involve work that's like your main job?" 

• Answer "I got it in 2020" when asked "How often did you get income for [Description]?" 

• Answer "Yes, it did involve an intent to earn money."