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    Tax season is here. Don’t expect a refund for unemployment benefits

    Congress hasn't offered a federal tax break on jobless benefits collected in 2021. That may surprise taxpayers, since one was available the prior year.

    PERSONAL FINANCE

    Tax season is here. Don’t expect a refund for unemployment benefits

    PUBLISHED MON, JAN 24 202212:01 PM ESTUPDATED MON, JAN 24 202212:11 PM EST

    Greg Iacurci @GREGIACURCI WATCH LIVE KEY POINTS

    Tax season started Jan. 24 and runs through April 18. A tax break isn’t available on 2021 unemployment benefits, unlike aid collected the prior year.

    The federal tax code counts jobless benefits as taxable income.

    The American Rescue Plan Act had waived federal tax on up to $10,200 of benefits collected in 2020. The measure applied per person, for households with income less than $150,000.

    Getty Images

    Tax season is officially here. And those who collected unemployment benefits in 2021 may be in for an unwelcome surprise.

    While a federal tax break on jobless benefits was available during last year’s tax season, the same isn’t true this year.

    Since unemployment benefits count as taxable income, recipients who didn’t have tax withheld from their unemployment payments (or didn’t have enough withheld) in 2021 may owe money to the IRS or get a smaller-than-expected tax refund.

    The American Rescue Plan Act, a pandemic relief law, waived federal tax on up to $10,200 of unemployment benefits per person collected in 2020, a year in which the unemployment rate spiked to levels unseen since the Great Depression.

    Households qualified for the federal waiver if their income (minus benefits) was under $150,000.

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    However, Congress hasn’t approved a similar tax break for 2021 benefits — which may surprise taxpayers when they file their income tax returns. Tax season starts Jan. 24 and runs through April 18.

    Approximately 25 million people collected jobless benefits last year, according to Andrew Stettner, a senior fellow and unemployment expert at The Century Foundation.

    By comparison, roughly 40 million people got benefits in 2020, collecting $14,000 each, on average, according to The Century Foundation. However, less than 40% of payments had taxes withheld, the group estimated.

    Of course, Congress could pass legislation during tax season offering a tax break to unemployment recipients. That’s what happened last year — Democrats passed the American Rescue Plan Act in March, and has since issued retroactive tax refunds to millions of people who’d filed their returns before the measure became law.

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    However, lawmakers don’t seem poised to offer another reprieve.

    The U.S. economy and job market have rebounded significantly since early 2021. Claims for unemployment benefits at the end of December had fallen to pre-pandemic levels. The national unemployment rate is 3.9%, its lowest level since February 2020.

    That’s not to say the labor market has fully recovered. Employment is still 3.6 million jobs below its pre-pandemic baseline, and nearly 2.3 million people have left the labor force.

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    Unemployment tax refund: Will you get a refund for this benefit?

    Tax season officially started on January 24, with the deadline to file your taxes being set at April 18, and filers may be wondering whether the US government will provide those wh

    US News

    Unemployment tax refund: Will you get a refund for this benefit?

    Filers were given a tax break last year

    Unemployment tax refund: Will you get a refund for this benefit?

    10/02/2022 - 07:41 CST

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    Unemployment benefits: How to apply for this benefit in Texas

    Tax season officially started on January 24, with the deadline to file your taxes being set at April 18, and filers may be wondering whether the US government will provide those who received the unemployment benefits with another tax break.

    Last year, the government imposed no taxes on those who received up to $10,200 of benefits in 2020 as part of the COVID-19 relief law, the American Rescue Plan Act.

    According to senior fellow and unemployment expert at The Century Foundation, Andrew Stettner, there were approximately 25 million US citizens who received unemployment benefits last year compared to the 40 million people who did so in 2020.

    Will you get a refund for the jobless benefit?

    Although many filers may have expected that they would receive another break this year, this is not the case, as unemployment benefits will count as taxable income.

    "There's no exclusion this year," said Mark Luscombe, principal analyst for Georgia-based Wolters Kluwer Tax & Accounting.

    "But last year at this point there was no exclusion either.

    "At this point all unemployment compensation in 2021 is fully taxable and I'm not expecting an exclusion to be adopted."

    US economy is recovering

    Meanwhile, the US market seems to have bounced back over the last year, as the national unemployment rate is now set at 3.9 percent, which is the lowest figure the government has registered since before the pandemic outbreak in February 2020.

    "America is getting back to work; our economy is starting to work for more Americans," US president Biden said back in November.

    "Our economy is on the move. Beating Covid-19 remains one of the most important ways to strengthen our economy.

    "There's a lot more to be done. We still have to tackle the costs that American families are facing. But this recovery is faster, stronger, fairer and wider than almost anyone could have predicted."

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    Do I Have to Pay Taxes on my Unemployment Benefits? – Get It Back

    Do I Have to Pay Taxes on my Unemployment Benefits?

    March 8, 2022

    By Christine Tran, 2021 Get It Back Campaign Intern

    Yes, you need to pay taxes on unemployment benefits.

    Like wages, unemployment benefits are counted as part of your income and must be reported on your federal tax return. Unemployment benefits may or may not be taxed on your state tax return depending on where you live. Regardless, you must pay federal taxes on your unemployment benefits.

    If you received unemployment benefits, your tax refund may be smaller than in previous years. If you didn’t pay taxes on your unemployment checks as you received them, your tax refund may be used to pay for the taxes that you owe, resulting in a smaller refund.

    For Tax Year 2020 (taxes filed in 2021, you don’t have to pay tax on the first $10,200 of the unemployment benefits you received in 2020 if your income is under $150,000. However, this does not apply for Tax Year 2021 (taxes filed in 2022).

    Click on any of the following links to jump to a section:

    COVID-19 economic relief and taxes

    How do unemployment taxes work?

    How do I pay my unemployment taxes?

    What can I do if I can’t pay my federal taxes?

    How do I report my Unemployment Benefits?

    Need help with your taxes?

    Problems with the IRS?

    COVID-19 economic relief and taxes

    COVID-19 economic relief and taxes Stimulus Checks and Expanded Unemployment Benefits

    The COVID-19 pandemic has led to severe economic hardship, with millions of Americans losing their jobs. As a response, Congress passed key legislation that expanded unemployment benefits and delivered direct stimulus payments to provide economic relief. The key thing to understand is that you do not pay taxes on stimulus payments, whereas you do pay taxes on unemployment insurance.

    Click here to read more about COVID-19 relief.

    The additional $600 per week from the CARES Act is taxable. The $600 emergency federal unemployment benefits you may have received each week on top of your regular unemployment benefits is part of your taxable income for federal taxes and possibly for state taxes.The additional $300 per week from the $900 billion relief package is taxable. The $300 emergency federal unemployment benefits you received each week on top of your regular unemployment benefits is part of your taxable income for federal taxes on and possibly for state taxes.The additional $300 per week from the American Rescue Plan is taxable. The $300 emergency federal unemployment benefits you received each week on top of your regular unemployment benefits is part of your taxable income for federal taxes on and possibly for state taxes.The first stimulus check from the CARES Act is not taxable. The $1,200 stimulus payment is considered an advance of a tax credit for the 2020 tax year and is not considered part of your taxable income. Note: If you didn’t receive your stimulus payment in 2020, click here to learn how to claim it on your tax return if you qualify.The second stimulus check from the $900 billion relief package is not taxable. The $600 stimulus payment is also considered an advance of a tax credit for the 2020 tax year and is not considered part of your taxable income. Note: If you didn’t receive your stimulus payment, click here to learn how to claim it on your tax return if you qualify.The third stimulus check from the American Rescue Plan is not taxable. The $1,400 stimulus payment is also considered an advance of a tax credit for the 2021 tax year and is not considered part of your taxable income. Note: If you didn’t receive your stimulus payment, click here to learn how to claim it on your tax return if you qualify.

    Unemployment Federal Tax Break

    Last year, the American Rescue Plan, gave a federal tax break on unemployment benefits. For Tax Year 2020 (taxes filed in 2021), you didn’t have to pay federal tax on the first $10,200 ($10,200 per person if you are married, filing jointly) of your unemployment benefits if your adjusted gross income (AGI) is less than $150,000 in 2020. The $150,000 income limit is the same whether you are filing single or married.

    Click here for instructions on how to claim this tax break.

    For paper filers, the IRS published instructions on how to claim the unemployment tax break: New Exclusion of up to $10,200 of Unemployment Compensation. For online filers, the IRS has stated that tax software companies have updated their systems to reflect the unemployment federal tax break. If you file your taxes online and haven’t filed for 2020 yet, you may want to make sure your tax software is updated before filing your tax return.

    In addition, remember that this is a federal tax break, which means that you may still have to pay state taxes on your unemployment benefits. You can read Kiplinger’s State-by-State Guide on Unemployment Benefits to see if your state gives a state tax break on your unemployment benefits.

    If your state decided to give you a state tax break and you already filed your state return, you should check to see if you are newly eligible for any state tax credits.

    Source : www.taxoutreach.org

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