Don’t Let Taxable Unemployment Benefits Catch You Off-Guard
Many Americans who were both directly and indirectly impacted by the COVID-19 pandemic have found it necessary to file for unemployment benefits. These benefits provide much-needed relief, but there are a few tax-implications that could loom on the horizon for recipients.
Unemployment benefits, including the additional $600 per week Coronavirus relief, are considered taxable income. If you have not had taxes withheld, it’s a good idea to make adjustments now to reduce your tax burden.
- To check your estimated withholding, use the IRS calculator.
- You can make additional estimated tax payments using IRS form 1040ES to reduce your tax liability.
- You should receive a Form 1099-G from the state unemployment office at the beginning of the year showing the total benefits you received for the prior year.
Plan ahead and take action now while you have a few months to help offset any potential tax liability. For more information, contact your state’s unemployment office or visit the IRS website.