WASHINGTON — If you took unemployment during the pandemic, you might be in for a surprise as you file your taxes. The pandemic-related economic shutdown has created new questions for tax season.
Whether you were furloughed or laid off, it’s been devastating, and those unemployment checks have created a lifeline for millions of Americans. But it’s tax time and experts believe you might be in for a shock.
Question:
How will unemployment checks affect your taxes?
Answer:
Depending on what you chose to withhold when you filed, you could owe money.
Our Sources:
The Internal Revenue Service (IRS) and April Walker, our tax expert from the Association of International CPAs.
What We Found:
“We find that there may be an unpleasant surprise coming up when you're filing your 2020 return,” April Walker said.
Walker explained according to the IRS, unemployment checks count as income.
“It is taxable to you just exactly like your regular other income, your wages or that sort of thing,” she said.
In case you forgot, 2020’s unemployment checks came with an extra $600 per week for several months. So, you may have earned more income than you expected.
How much you will owe the IRS depends on how you filled out your tax forms when you filed for unemployment.
“Because maybe if you chose not to do withholding...and it is taxable income, you are ultimately going to owe taxes come April 15th,” Walker said.
Bottom line: Just because it's unemployment doesn’t mean you won’t get taxed. It all depends on how much you had the government withhold when you initially filed for unemployment.
April Walker explained that in some cases, you may still owe despite withholding in your unemployment checks.
If you have questions about your taxes, consult an accountant or tax preparer.