tax question for unemployment and S S benefits

[geetaashish]

i am unemployed senior citizen. in come Soc Security and unemployment in 2021. filing joint return. spouse also on Soc security. how do i take care of my taxes - any way to defer it?

[ReneeTAXEA1]

Thank you for contacting TurboTax Live!  We see that you have a question - about unemployment and your Social Security Income - and in filing a tax return to get a tax refund, that you have not yet filed nor 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!

[xmasbaby0]

@geetaashish  Sorry--no there is not a way to defer your taxes.   You can receive unemployment while receiving Social Security.  But depending on how much unemployment you received, the unemployment can make your SS taxable.   If you did not have tax withheld from any of it, then you could owe.    If you are asking about tax year 2021, we do not know yet if Congress will say that unemployment tax is waived.   That law was only for the 2020 tax year so far.

And....even if the unemployment is not taxable, it is income and it does affect how much of your SS is taxable.  Lots of people have been confused about that.

TAX ON SOCIAL SECURITY

Up to 85% of your Social Security benefits can be taxable on your federal tax return.  There is no age limit for having to pay taxes on Social Security benefits if you have other sources of income along with the SS benefits.  When you have other income such as earnings from continuing to work, investment income, pensions, etc. up to 85% of your SS can be taxable. 

 What confuses people about this is that before you reach full retirement age, if you continue working while drawing SS, your benefits can be reduced if you earn over a certain limit. (For 2017 that limit was $16,920 —for 2018 it was $17,040—for 2019 it was $17,640— for 2020 it is $18,240; for 2021 it is $18,960)  After full retirement age, no matter how much you continue to earn, your benefits are not reduced by your earnings; your employer will still have to withhold for Social Security and Medicare.

To see how much of your Social Security was taxable, look at lines 6a and 6b of your 2020 Form 1040

https://ttlc.intuit.com/questions/1899144-is-my-social-security-income-taxable

https://www.irs.gov/help/ita/are-my-social-security-or-railroad-retirement-tier-i-benefits-taxable

You need to file a federal return if half your Social Security plus your other income is $25,000 when filing single or head of household, or $32,000 when filing married filing jointly, $0 if you are filing married filing separately.

Some additional information:  There are 13 states that tax Social Security—Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, North Dakota, Rhode Island, Utah, Vermont, and West Virginia.  These states offer varying degrees of income exemptions, but four mirror the federal tax schedule: MN, ND,VT, and WV