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Unemployment Benefits and Your Tax Obligation

On Behalf of | Dec 3, 2020 | Firm News |

unimaginably

This year has recorded unimaginably high unemployment rates; which means more people than ever have filed for and received unemployment benefits. Additionally, earlier in the year, many also received an additional $600 per week thanks to the Federal Pandemic Unemployment Compensation (FPUC) program.

Are unemployment benefit dollars taxable?

Yes. In most cases the unemployment benefits were taxed a flat rate of 10%, however, this may have not been enough based on your number of dependents and your state requirements. Therefore, you may owe a higher amount in taxes this coming April.

The IRS has created an interactive tool to help you determine an estimated amount you can expect to pay based on the unemployment benefits you have received.

IRS Interactive Tool

The results of using this tool are not a guarantee of the amount you will owe, but will help you determine if you need to expect to pay more in taxes this coming April.

In some states you will need to plan to pay for federal and state taxes on your unemployment benefits, which include the additional $600 compensation. Check with an accountant or visit your state’s tax department.

Forewarned is Forearmed

Keep in mind that you must report your unemployment benefits as taxable income when it comes to filing your taxes. Your state department will notify both you and the IRS of the amount you have received, so make sure you report accurate numbers. The IRS has more information on their website as it relates to unemployment benefits and your tax requirements: IRS Unemployment Benefit and Taxes.

SAVE MONEY TODAY: One of the best things you can do is spend the next four months setting aside a little money each week to help prepare for any unexpected taxes you may have to pay this April.

A Little Good News

If you were one of the millions who received a stimulus check from the federal government to help during the peak of the pandemic, these dollars are not taxable and therefore do not need to be reported as part of your earned income. According to the IRS:

Will I pay taxes on my stimulus payment?

No, the payment is not income and taxpayers will not owe tax on it. The payment will not reduce a taxpayer’s refund or increase the amount they owe when they file their 2020 tax return next year. A payment also will not affect income for purposes of determining eligibility for federal government assistance or benefit programs.

The attorneys at Bankruptcy Advocates have helped thousands of people over the years, and one of the key reasons people find themselves filing for bankruptcy is because of unexpected expenses for which they haven’t prepared. While tax amounts owed to the government are not eligible to be erased when a person files bankruptcy, it can be the reason people become delinquent with other bills such as medical, educational and credit card payments. We can help and the first consultation is always free.

Southern Illinois Bankruptcy Attorney law firm Bankruptcy Advocates is located in Carbondale and serves a wide geographic community including Carbondale, Murphysboro, Marion, West Frankfort, Johnston City, Benton, Herrin, DuQuoin, and Pickneyville. We are a debt relief agency. Our southern Illinois bankruptcy attorneys help people file for relief under the Bankruptcy Code. Give us a call at 618-549-9800 or email us at [email protected]  to speak about your case or legal matter. Convenient appointment times are available.