• Email Us Here
  • Call 973-256-2555 in NJ
  • Call 508-663-4878 in MA

Locker Financial Services

We simplify the complicated

  • HOME
  • ABOUT
    • MEET LAUREN LOCKER
    • MEET ANDREW CHAN
    • OUR SERVICE TEAM
  • CLIENT SERVICES
    • FEE-ONLY FINANCIAL PLANNING – FULLY FIDUCIARY
    • ASSET MANAGEMENT AND INVESTMENT ADVISORY SERVICES
    • SPEAKING AVAILABILITY
  • TOOLS
    • LOG INTO SHAREFILE
    • LOG INTO YOUR CLIENT PORTAL
    • CLIENT QUESTIONNAIRE
    • SPENDING PLAN
    • CHECKLIST OF DOCUMENTS
    • Retirement Plan Contribution Limits and Tax Deadlines
  • ELDERLIFE
  • PRESS
  • BLOG
  • CONTACT US

March 1, 2021

Yes, Unemployment Benefits Are Taxable

Two emergency relief bills passed in 2020 in response to the COVID-19 pandemic will make this an unusual tax season for many taxpayers. The Coronavirus Aid, Relief, and Economic Security (CARES) Act was passed in March, and a second relief package was attached to the Consolidated Appropriations Act, 2021, in December.

The federal government relied on the tax system to deliver financial lifelines to struggling households, boost consumer spending, and help speed the economic recovery.

The number of unemployed workers spiked above 22 million in March 2020, and more than 9 million people were still out of work at the end of the year.1  Both relief bills expanded unemployment benefits and provided them to many workers who normally are not eligible (including the self-employed, independent contractors, and part-time workers).

Unemployment benefits, which sustained many families impacted by the pandemic, are considered taxable income, and many recipients may not have correctly withheld taxes from their 2020 payments. Avoiding a surprise tax bill typically requires opting into a 10% withholding rate and, in some cases, paying additional quarterly taxes during the year.

Last year was unpredictable, and your financial situation may have been far from normal. You should file your 2020 tax return by the April 15 deadline, even if you are worried that it’s going to show a balance due. Being up-to-date on filing is generally required to pursue a payment agreement with the IRS. If you owe $50,000 or less, you may even be able to apply online for a short-term extension (up to 120 days) or a longer payment agreement. Paying as much as you can afford can help limit penalties and interest that accrue on unpaid amounts.

Photo Credit: KTTN Radio

Topics: / Budgeting, Cash Flow, Financial Planning, Taxes, Unemployment / budgeting, Cash Flow, Financial Planning, Taxable Income, Taxes, Unemployment Income

  • Fine Print / Legal Disclosures
  • Privacy Notice
  • Form CRS – Client Relationship Summary

copyright © 2023 · Locker Financial Services, LLC