Unemployment Benefits and Taxes

This year, a large number of Americans have been confronted by unemployment. As endless individuals are battling with financial crisis, the consequences of unemployment reach beyond the bimonthly paychecks. Take, for instance, those that have gotten monetary help via unemployment compensation. While the money received under the unemployment program may have been necessary to ensure families can make ends meet, there is likely to be some negative outcomes as a result.

Unfortunately, many people are not aware that unemployment benefits are taxable income. This means that money received as income through unemployment will be assessed and taxed come April 15, 2021. Therefore, if someone who has received unemployment has not been setting aside a portion of that benefit check for taxes; they will likely owe taxes at the end of the year.  For those who are accustomed to a refund and not paying taxes at the time of filing, this tax implication could be devastating.

For those who received unemployment compensation throughout the year, the IRS will issue a 1099 form. These forms will be used to report the amount of income earned under the unemployment compensation. For those who are unaware of their tax liabilities for unemployment benefits, these costs could deliver another financial blow.

Fortunately, there are solutions to help you manage your debts and tax liabilities when you are experiencing financial hardship. One immediate solution is to fill out a W-4 form and submit to the unemployment department to voluntarily withhold taxes for next year.  Further, if you are experiencing financial hardship, are being harassed by creditors, are worried about your owed taxes from unemployment, or are simply looking to avoid additional debt problems; contact our Dallas bankruptcy attorney office today.