What You Need to Know About Unemployment Benefits - Presented By TheStreet + TurboTax

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Video Transcript ~ What You Need to Know About Unemployment Benefits - Presented By TheStreet + TurboTax:

- With so many people unemployed this year, filing unemployment income and its corresponding taxes is going to be a real point of contention for a lot of people. Lisa Greene-Lewis, CPA and TurboTax expert is here to walk us through it. So let's not talk about this year, let's talk about unemployment benefits in general in the past, taxable income, correct?

- Correct, in general, usually unemployment income is taxable, and I know there were so many people unemployed, and it's voluntary to withhold taxes. So a lot of people really needed that money and they did not withhold taxes.

- And I feel like sometimes it's confusing too. People don't realize that it is voluntary. I think maybe there's an assumption that it's gonna come out automatically. You need to elect to have taxes withheld, both at federal and state level, right?

- Right, correct, yes. You would need to do that at both levels, but there is some relief under the American Rescue Plan because the first $10,200 of your unemployment income is tax-free under the new American Rescue Plan. And then if you're married, filing jointly, that amount goes up to $20,400.

- There's an income limitation on that though, right? Not everyone gets that tax free gift, so to speak.

- Yes, so your income has to be under $150,000 in order to get that relief.

- Okay, and so the good news is if I didn't withhold taxes and I'm nervous that I'm gonna be smacked with a large tax bill, this might alleviate it a little bit. Many people, and we talked about this in an earlier video, might have already filed their tax return in hope of getting a refund back really quickly. And then this comes along, do they have to go back and amend? Or should they just be patient at this point?

- Yeah, the IRS announced that there's nothing they need to do. The IRS is going to make adjustments. And if they paid taxes on that amount, they are going to send the money back to the tax payer.

- So there's this extra, now, for 2021, we talked about the American Rescue Plan. There's this extra $300 that people could be receiving up and through it seems like about Labor Day. That they should know is taxable income. And if they haven't had money withheld, they can go back and fix it, right?

- Yes, so, so far, I mean, as far as we know, the provision under the American Rescue Plan, that was for your 2020 taxes and not for the 2021 taxes, which would be the new unemployment that you would be taxed on. So as far as we know, yes, it would be under the normal provisions where it is taxable. But as you said, you can voluntarily request with the form W-4V to have taxes taken out.

- Yeah, so go back and do it if you haven't. If you've receiving unemployment benefits in 2021 and you don't have taxes withheld, try to voluntarily select that, that way you don't get beat up next year. And going forward, just so everyone is aware, unemployment benefits are taxable. I know TurboTax has this great unemployment site, right?

- Yes, so we have that unemployment center that gives you tips and advice. And we keep up to date information on unemployment, the provisions that are occurring. So you can go there on the TurboTax blog and check out up-to-date information there.

- We hope everyone goes back to work though and no longer needs benefits. So Lisa Greene-Lewis, CPA, TurboTax expert. Thanks for all the info.

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