Unemployed? You May Owe Income Taxes to the IRS Next Year

If you were furloughed or laid off due to the Coronavirus, and you’re one of the millions receiving unemployment benefits, you may wind up owing income taxes next year.

Fox Business reports that the federal government counts unemployment benefits as regular income, and taxes it accordingly. But they don’t do what most businesses do and withhold money from the benefits. That means when you file your taxes next year, you’ll have to claim your unemployment benefits, and give the government some of its money back.

The same holds true if you live in a state that collects state income tax.

Even if money is withheld, it’s generally only 10 percent, which is often enough to cover the tax liability.

So what can you do? You can request to have taxes withheld from your unemployment benefits, or you can make quarterly estimated payments to the IRS. Those payments are normally required of people who expect to owe tax of $1,000 or more when their 2020 return is filed next year.

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