As Tax Season Approaches Remember Unemployment Is Taxable
After a rough 2020...we now may finally be seeing light at the end of the tunnel, but we have to get through Tax season first.
Unemployment was a lifesaver for some during the pandemic, but it has tax consequences according to a story aired on WIVB-TV.
It’s all taxable, and if you didn’t withhold the state and local income taxes, you may find that now is the time to pay up.
Millions of Americans lost their jobs during the pandemic, so Congress extended the maximum period for collecting unemployment and added hundreds of dollars per week in benefits- all of which is taxable.
Tim Eliason of EG Tax Service said there’s a limit on how much unemployment they can collect before a “Kiddie Tax” kicks in, which would be at their parents’ rate.
“Most kids probably fall in the ten percent,” Eliason said. “We might have parents that fall in the 22 percent- so that income is going to get hit.”
Some haven't received their second stimulus check, and if you are one of them, you will likely have to file for a tax credit on your 2020 return and collect it as a refund.
For those who do their own taxes, the IRS is not making it easy this time around.
“Whether the income, or the access to computers, things like that- you can’t even go to the library and do it, because the library might be closed,” Eliason said. “It is unfortunate the IRS did not have the free portal set up this year, for the second one like they did the first one.”
There is a bit of good news in your 2020 returns, parents can now get that $600 CARES Act benefit on their tax return...check with your accountant or tax professional for additional information.