how do I go about not paying taxes for unemployment? Or, was this changed?
I was under the impression that unemployment income was not taxable or partial. Please advise. I’m so confused
Have you already filed your 2020 return? If not, good news....the software will do all of those calculations for you. All you need to do is enter your 1099G for unemployment exactly as it appears and the software will calculate how much--if any--of your unemployment is taxable for you.
You will have to enter a 1099G that is issued by your state.
Some states will mail out the 1099G. Or you might need to go to your state’s unemployment website and use the password, etc. that you have been using to certify for weekly benefits to get your 1099G from the state’s site.
Enter your 1099G in Federal>Wages & Income>Unemployment
Go through the screens very carefully, making sure to enter any federal/state tax you had withheld from the unemployment.
In March 2021 Congress passed a law waiving federal tax on the first $10,200 of unemployment received in 2020. Many states (but not all) also passed similar laws for state tax on unemployment. TurboTax software is up to date with all of those tax law changes.
Thank you for contacting TurboTax Live! We see that you have a question - about unemployment and your additional tax refund, that you have not yet received! We thank you for your question!
We see that your question was - how you "go about not paying taxes for unemployment? Or, was this changed?" We also see in your question that you were under the impression that unemployment income was not taxable or only partially taxable.
We agree with you - based on the timing of the tax rule change, and the exclusion of up to $10,200 of unemployment income as received during the 2020 tax year, that this can be awfully tricky! But - we are here for you at TurboTax Live! And - we checked our resources to give you the best options and suggestions possible to resolve your question!!!
We checked our resources - here at TurboTax Live! and at the IRS, and here is what we learned:
How will I receive my additional unemployment refund amount from the IRS?
The IRS will issue refunds resulting from this unemployment income relief by direct deposit for taxpayers who provided bank account information on their 2020 tax return.
If valid bank account information is not available, the refund will be mailed as a paper check to the address of record. The IRS will continue to send refunds until all identified tax returns have been reviewed and adjusted.
These refunds are subject to normal offset rules such as past-due federal tax, state income tax, state unemployment compensation debts, child support, spousal support or student loans. The IRS will send a separate notice to the taxpayer if the refund is offset to pay unpaid debts.
How do I know if I am now eligible for additional deductions and credits, and what do I do to get them?
It’s a bit tricky.
The IRS will adjust your return and the amounts for any deductions and credits you claimed on it. For example, say you claimed the Earned Income Tax Credit (EITC) on your return. And because the new unemployment exclusion changed your income level, you would now be eligible for an increase in EITC amount. The IRS would adjust your return for you and send you the additional refund amount with your additional unemployment benefits. You are all set.
However, say you were not originally eligible for the EITC on your return, but now, because the exclusion changed your income, you are eligible for the EITC. You may need to amend your return to claim that new credit based on your tax situation:
- The IRS can adjust tax returns for those who are single with no children and the exclusion makes them eligible for EITC.
- Taxpayers who have qualifying children and become eligible for any new benefits once the exclusion is calculated may have to file an amended tax return to claim new benefits.
If you chose not to amend your return, you’d only get the additional unemployment benefits automatically from the IRS and would miss out on additional money you’d be eligible for.
The IRS can also adjust tax returns that already include EITC and qualifying children. If you filed with TurboTax, check your inbox. We sent you an email to help you understand how all this affects you and with instructions on what to do.
We trust and hope that this resource detail assists you in resolving your Question, and thank you for choosing TurboTax Live!
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@Adventure06 If you asked about this issue because you already filed your tax return before the tax law changed-----
So far the IRS has issued over 8 million of those “extra” refunds for tax on unemployment. The IRS has not announced when the next batch will be sent out, but they are still working on them.
The IRS is recalculating refunds for people whose AGI is $150K or below and who filed before the tax law that changed the amount of unemployment that is taxable on a federal return became effective.
The IRS began to send out the additional refund checks for tax withheld from unemployment in May. The refunds are being sent out in batches—starting with the simplest returns first. If you are eligible for the extra refund for federal tax that was withheld from your unemployment the IRS will be sending you an additional refund sometime during the next several months. TurboTax cannot track or predict when it will be sent. The IRS has not provided a way for you to track it, so all you can do is wait for the refund to arrive.
Please read this news from the IRS:
Happy to help clear this up for you!
Is unemployment taxed?
Typically, unemployment income is taxable and should be included with any other taxable income you have in the year.
Some states also count unemployment benefits as taxable income. When it’s time to file your taxes, you will need Form 1099-G which will show the amount of unemployment income you received. It will also show any federal taxes you had taken out of your unemployment pay. The 1099-G is only available online in many states, so you may need to log into your unemployment account to get the form.
Are there any tips to lower my taxes if I didn’t have taxes withheld from my unemployment income?
There are a few steps you can take. If you are still receiving unemployment you can request that taxes be taken out by filling out IRS Form W-4V, Voluntary Withholding Request, adjust your withholding on your Form W-4 if you get a new job, or make quarterly estimated tax payments. Also don’t forget, you may now qualify for tax deductions and credits you didn’t before due to lower income from being unemployed.
I hope these are helpful!
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I am looking to see what my next step is?
I filed in May 2021 for 2020. It reads I owe however, if it’s tax free what’s my next step?
wait? Till they amend tax returns. Since it will even itself out? Owe/refund
help sign frustrated
@Adventure06 If you prepared your 2020 tax return in May then you used software that was already up to date with the tax laws for tax on unemployment. If the results of that return show that you owed tax due, then you owe it. Those "extra" refunds for unemployment are going out to people who filed in February, March or early April before the law changed and before the tax software was updated. By May, the software would have calculated your tax on unemployment correctly according to the current law.
Look at your own Form 1040. You should see the unemployment on line 7 and the amount that was not taxed on line 8 of your Schedule 1
Click on Tax Tools on the left side of the screen. Click on Tools. Click on View Tax Summary. Click on Preview my 1040 on the left side of the screen.
If you have federal tax due you can pay by mailing your payment with the 1040V voucher, (which has the address printed on it, having the payment taken out of a designated bank account, or you can pay directly on the IRS website.
You must pay your state tax due using the state’s preferred method of receiving payment. For most states that will be by making a payment to the state’s own tax website, or by mailing a check or money order.