Jobless Americans Face Surprise Tax Bills On Unemployment Benefits

[DonViejo]

02/18/2021 05:45 am ET

In an absurd twist, many say they might be forced to use the next round of government-provided stimulus checks to pay the government.

By Emily Peck

-snip-

The U.S. is about to face what has to be one of the more nonsensical policy failures of the pandemic: Millions of Americans, already struggling financially, could be hit with a huge tax bill because they received unemployment insurance last year.

Perversely, because of the relative generosity of the benefits passed by Congress last spring ― $600 a week on top of state benefits ― tax bills might reach into the thousands of dollars, according to a report released by The Century Foundation last week, as well as conversations HuffPost had with unemployed workers.

Households could see tax bills between $1,000 and $2,000, said Brian Galle, a professor at Georgetown Law School and the report’s co-author. Some bills could reach as high as $3,000; others may not owe money but won’t get the refunds they’re expecting.

Most of these people still don’t have jobs. “Asking people who are out of work to dig into their pockets and come up with another $3,000 when they’re already having trouble paying rent — this is just a bad combination of events,” Galle said.

more/full article
https://www.huffpost.com/entry/surprise-tax-bill-unemployment-benefits_n_602d58edc5b66da5db9e8ddf

[MichMan]

1. When our state was shut down and my employer was closed, you could choose to have UI taxes withheld

No one should be surprised by this

[doc03]

2. Another gift from Ronald Reagan. He said something like people were getting to much

money sitting at home doing nothing.

[jimfields33]

7. Seriously? And in 40 years it wasn't fixed?

I mean Biden is cleaning up the mess from trump. Obama cleaned the mess from Bush. Nobody thought to clean the mess from Reagan?

[doc03]

22. Reagan started taxing SS benefits and that has never been fixed either. Reagan got rid of the

Fairness Doctrine, that gave rise to Rush Limbaugh, Faux News and the other right wing garbage. Reagan
reclassified Defined Benefit Pension Plans as an asset instead of a liability that destroyed DB Pensions.
Reagan started the war on unions. This country has been going down hill ever since RR.

[doc03]

23. Reagan and Bush 1 were followed by Bill Clinton I will just leave it there nt

[stopbush]

9. Bingo! Before Reagan, unemployment benefits were not taxed.

[MichMan]

19. How did that ever pass the House?

[stopbush]

20. Unbelievably, by a voice vote!

[central scrutinizer]

3. Nothing new

It’s always been like that. My wife, an IBEW electrician, was occasionally laid off and collected UI. We always asked that 20% and 8% be withheld for federal and state income tax.

[ret5hd]

4. Well, always since 1986...but not always always.

[liberalmuse]

5. It's so weird to see even liberals justifying this

Americans are hands down the most ridiculously brainwashed people on earth. I guess we’ve acquired a taste for shit sandwiches after being convinced they’re delicious and good for us. Thank god a lot of the younger folk aren’t having it.

[maxrandb]

6. Seems like an easy fix

Just make Unemployment Insurance non taxable for folks under a certain income threshold, or tax it at the same rate we tax Capital Gains.

Oh wait, this is Retrumplican 'Murika, so "screw you, I got mine"

[jonstl08]

8. Taxes withheld

This year I have seen this a lot in the tax office. When you sign up it gives you the option to have 10% withheld for federal taxes. Most did but some were under the impression it was tax free money. In Missouri you can go online to sign up and it states do you want federal taxes withheld. Then you pick a %. So the people just glossed over this and did nothing. Most of my clients had federal taxes withheld but in Missouri they do not give you an option of withholding state taxes. So most of my clients are owing the state of Missouri at least $300 in taxes.

When they sit down at my desk the first question I ask is if they received unemployment. If they say yes and no taxes were withheld I warn them upfront they more than likely will owe money to state and federal because of it.

[stopbush]

10. We had 10% withheld from our UI benefits, but the problem is

that most people receiving UI need the money NOW to make ends meet. The thought of withholding 10% of what is always a low amount of money when compared to one’s salary can mean going hungry for a day. So people roll the dice, hoping they get their job back soon, and that they will be able to meet their tax burden down the road.

Here in CA, the 10% was deducted only from the benefits paid by CA, not the fed money.

[carburyme]

14. The same here in VA...

Yes, the 10% was an option to take out of the benefit for state unemployment but not for the extra 600.00 coming from the Fed..

My son was furloughed for months now I have to do his return and had to tell him he will owe 1000.00 at least a money he doesn’t have at the moment. He’s just trying to get back in the work force doing odds and ends to pay his bills.

[MichMan]

16. It applied to all of it in my state

After my employer was forced to shut down, I elected to have taxes withheld when given the option and being informed it was taxable.

[jonstl08]

18. Owing money

At the very least the feds and states should at least allow people to pay it back over a certain time period and not accrue any interest penalties.

[jonstl08]

17. Agree

Agree it is a crap fest right now and the government needs to fix it but will not do anything about it. Asked my GOP rep about it a month ago and all I hear is silence from her.

[MichMan]

11. What did the people who chose to have zero taxes withheld think it meant when they were asked ?

That paying taxes on it was going to be optional as a donation?

[Demsrule86]

13. Unemployment should be tax free in any case...stimulus will fail if used for taxes

The wealthy pay nothing but those out of work and struggling get screwed as usual.

[MichMan]

15. I wouldn't consider having to pay taxes equals getting screwed

[Demsrule86]

24. I do not believe unemployment should be taxed. This is a prime example of how we go after

the little guy while allowing the wealthy to skip paying taxes...income taxes were supposed to be paid by the super wealthy of the day when Roosevelt implemented them...not by the poor or the middle class...we fight amongst ourselves for the crumbs left to us by the irresponsible greedy rich people...many of whom inherited their wealth and never worked in their lives.

[LizBeth]

21. They took some taxes out of UI but I didn't think enough and was wondering if it would take my

refund. I do not think I will owe. Generally I get back about 1100. I figure I have room there and just not get a return. Fingers crossed I will not owe.