Tax Consequences of Unemployment Benefits
Due to Covid-19, many people have received unemployment benefits. Some for the very first time.
You may be wondering - is the unemployment I received taxable? Unfortunately, the answer is YES. It is treated just like regular income you receive in your paycheck. If you have received any unemployment benefits, you should receive a 1099-G from your state which will show the total amount you received as well as any taxes that were withheld from your checks. You will need this form to figure out your taxable income and any refund or taxes due at the end of the year. (It should come around the same time as your W-2, if you are getting one of those).
If you did not elect to have any taxes withheld from your unemployment payments, you may end up owing money back to the federal and state governments when you file your taxes. If you are employed, you can always adjust your current withholdings to make sure you do not owe money at the end of the year. Or, if you are self-employed (or still unemployed), you can always send in a payment to avoid any underpayment penalties.
The IRS issued a Publication that answers some frequent questions and provides links to sites to help you calculate or make any payments. You can find that information here.
Or, reach out to us, and we will help you do an analysis of where you stand, so you can make adjustments for the rest of the year, and not have an unexpected surprise in early 2020!