If I elected to have federal taxes withheld throughout the entirety of my unemployment benefits, why do I still owe back taxes? I thought that was the whole point

[jonshah67]

why do I have to repay the government for my unemployment benefits when they were solely due to coronavirus?

[JamesG1]

The IRS considers unemployment compensation to be taxable income which you must report on your federal tax return. State unemployment divisions issue an IRS Form 1099-G to each individual who receives unemployment benefits during the year.  States vary in how they tax unemployment compensation.

TurboTax is reporting that the American Rescue Plan will include some form of 2020 unemployment relief.

The bill also makes the first $10,200 of unemployment income tax-free for households with income less than $150,000. This provision would be retroactive to tax year 2020 (the taxes you file in 2021).

It is not clear how or when the IRS will implement the new law.  At this point it is not clear whether amended tax returns will be required or not.  At this point the bill must still be signed by the President.

[SweetieJean]

Withholding on unemployment comp is usually at 10%, but your actual tax rate might be higher, especially if you have other 2020 income.  In addition, UE is not considered to be Earned Income, so you may have lost the EIC or another credit.