Americans are preparing their taxes, and after the pandemic caused higher rates of unemployment, people are confused.
There were a lot of issues with the 2020 tax returns and unemployment thanks to changes under the American Rescue Plan.
Now, people are wondering what’s different about 2021 and these benefits with their tax returns to the IRS.
The issues came when millions had already filed their taxes before that passed, and paid income tax on that $10,200.
Stimulus checks aren’t the same thing and are not considered taxable income.
Congress is unlikely to give the same reprieve for 2021 that they did for 2020, therefore taxes will be due on your benefits this year.
While the Build Back Better bill has provisions like extending the expanded child tax credit, the unemployment tax breaks aren’t included.
Paying unemployment benefit taxes to the IRS
You will need to pay taxable income on your benefits this year the way you would any other year.
This is true for both standard and extended benefits.
Most states collect unemployment taxes as well.
Only a few states do not collect taxes for these benefits
- New Jersey
How does unemployment tax work?
Your benefits are taxed at the same rate as regular income would be.
These benefits aren’t subject to Social Security or Medicare taxes.
You’ll receive a 1099-G from your state’s unemployment branch that works similarly to a W-2.