Those checks are taxable, so how much could you owe?
In a recent survey by Jackson Hewitt, 39 percent didn’t know unemployment checks are taxable income – unlike the COVID stimulus checks issued in 2020 as part of the CARES Act. If you were on unemployment this year, you will probably need to file a 1099-G form.
Unemployment benefits are taxable income and if you did not withhold money from each check, then you’ll owe about 10 percent when you file.
“For an individual that maybe received $25,000 in unemployment benefits, what do those taxes looked like based on those benefits? I’m going to say a minimum of $2,500,” Garcia said.
He added that when you’re signing up for benefits, it’s easy to overlook or misunderstand the federal withholdings question. Others may want to have access to every dollar of the benefit and put off thinking about the tax implications.
If you can’t pay all at once Garcia says, the IRS has flexible installment agreements.
“I would recommend that the tax preparer even set up an installment agreement, because if you don’t set up an installment agreement then that’s when the IRS gets a little nervous. They don’t know that your committed to paying off the balance, so then that’s when you start receiving some of those nasty letters,” says Garcia
The IRS has begun accepting tax returns for businessess, but has not announced when they will begin accepting tax returns for individuals.
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