PUA vs UI benefits

[BigTaxi]

I have appealed the "Redetermination" I received from WA ESD that wants to push me into a UI claim from a PUA claim (even though I have never had a W2 wage-earner job in WA state).  WA ESD wants to do this so that they can make a claim against gig economy companies for compensation of benefits paid out.

Is there a difference in the way the benefits paid will be taxed between PUA and UI on my federal return?

Can PUA claim benefits be offset by business expenses that occurred during the claim?

WA claims that they consider all gig workers "employees" even though the IRS classifies them as private contractors.

[ReneeTAXEA1]

Thank you for contacting TurboTax Live!  We see that you have a question - about unemployment (PUA & UI) and your additional tax refund, that you have not yet received!  We thank you for 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.

The IRS is also making corrections to Earned Income Tax Credit, Premium Tax Credit and the Recovery Rebate Credit since taxpayers may be eligible for these credits with the $10,200 income exclusion.

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.

https://blog.turbotax.intuit.com/tax-news/am-i-eligible-for-the-new-unemployment-income-relief-49427...

We trust and hope that this resource detail assists you in resolving your Question, and thank you for choosing TurboTax Live!

[NateTheGrEAt]

All unemployment is considered and treated the same for tax purposes. So you cannot deduct business expenses against any type of UI (either "regular" UI or PUA). From a tax standpoint, one type of claim vs. the other is a non-issue. 

[VolvoGirl]

If you file your business expenses on Schedule C they can be subtracted from your other income and reduce your taxable income.

But Some expenses, such as home office or section 179 depreciation can only be used to reduce your schedule C taxable income to zero, and not to create a loss. Excess deductions for these carry over to the next year.  And you have to answer yes to both questions about exclusive and regular use, not just one.  The area of your home office must be used regularly and exclusively for business to deduct it.