I received unemployment benefits in 2020 i receive...
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loko1904
New Member

I received unemployment benefits in 2020 i received $2,604.00 and i had federal taxes taken out which was a total of 259.00 dollars why did that make my refund go down?

 
4 Replies
MayaD
Expert Alumni

I received unemployment benefits in 2020 i received $2,604.00 and i had federal taxes taken out which was a total of 259.00 dollars why did that make my refund go down?

The amount of taxes withheld from your unemployment income is 10%. Based on your total income your Income might be taxed at a higher tax bracket.

For 2020, the lowest rate is 10% for incomes of single individuals with incomes of $9,875 or less ($19,750 for married couples filing jointly).

irs.gov

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JenniX
New Member

I received unemployment benefits in 2020 i received $2,604.00 and i had federal taxes taken out which was a total of 259.00 dollars why did that make my refund go down?

I’m noticing the same thing. I had 10% taken out already, and now turbo tax is wanting to charge an additional 10% on my unemployment. Seems I would have only been taxed 10% instead of 20% if I never had it taken out to begin with.

VolvoGirl
Level 15

I received unemployment benefits in 2020 i received $2,604.00 and i had federal taxes taken out which was a total of 259.00 dollars why did that make my refund go down?

@JenniX   That doesn't make sense.  The gross unemployment adds to your total income and may push you into a higher tax bracket.  So the 10% withholding might not be enough to cover the tax on the increase in income.  And by increasing your income you may have lost some EIC or child credits.

LenaH
Employee Tax Expert

I received unemployment benefits in 2020 i received $2,604.00 and i had federal taxes taken out which was a total of 259.00 dollars why did that make my refund go down?

Your refund would have decreased if you did not pay enough taxes on your unemployment during the year. The IRS considers unemployment income as taxable income, as do most states. Once you entered your other income into TurboTax, you were in a higher tax bracket. After all your income was inputted, your tax bracket was higher than the 10% withheld on your unemployment, which increased your total tax. Increasing your total tax would then decrease your overpayment of tax (refund). 

 

TurboTax has a great tool that can help you withhold the correct amount of tax on your income sources. Please see Tax Bracket Calculator for a better estimate on what should be withheld. 

 

@JenniX

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