The passage of the CARES Act earlier this year was designed to help ease the financial burden of the COVID-19 pandemic on people who lost their jobs. As part of the stimulus, the federal government added $600 a week to state unemployment benefits and increased the number of benefit weeks to 39. What do you need to know about these benefits?
They Don’t Come Without Strings Attached
Many of the workers who received unemployment benefits during the pandemic did so for the first time in their lives, so they did not fully understand how unemployment benefits work. The benefits that are received are fully taxable on a federal level, and many states also assess taxes on unemployment benefits. Unfortunately, this could create serious tax headaches for millions of filers across the United States who were unaware.
How Does the Tax Process Work?
If you received unemployment taxes, you will get a Form 1099-G in the mail from the state that gave you benefits. The form will detail the total amount that you received and the amount of taxes that were already paid or withheld. Assuming that you live and work in Maryland, you are eligible for taxation as a result. Some states close by don’t tax employment benefits, so if you live in Pennsylvania or Virginia you might have a different situation. Always work with your tax preparation at Miles Tax Advisory to ensure you are prepared.
What Happens Now?
If you live and work in Maryland and received unemployment benefits, you should be prepared to pay taxes on them, barring any changes to the CARES Act or additional legislation. The actual impact on your taxes might vary depending on how much you received, the other income that you did receive during the year, if you are single or married (and if you and your spouse were both receiving unemployment benefits at one point) and if you had any income tax withheld from your benefits. Miles Tax Advisory can help you to determine your tax liability for 2020 and help to ensure that you are ready for any unique tax situations like this in the future.
Start the 2020 Tax Preparation and Filing Process Now with Miles Tax Advisory
If you are ready to explore estate planning or plan to minimize your tax liability this year, we are always here to assist you!