![]() On the federal level, Senator Dick Durbin, D–Ill., and Rep. ![]() Additionally, a bill that would exempt unemployment benefits from taxes in 20 is awaiting a signature from Arkansas Governor Asa Hutchinson. Maryland and Delaware both recently passed legislation that waives state income tax on unemployment benefits for 2020. There are likely millions of Americans who are facing major tax bills because of unemployment benefits this year.ĭue to the scope of the issue, some federal and state lawmakers are attempting to step in to provide relief for those facing taxes on their unemployment benefits. In addition to the taxpayers who opted into withholding, there are many who did not realize their unemployment benefits were taxable - about 39%, according to a recent Jackson Hewitt survey. "It's not surprising that in general, the states just want to send out the flat amount to everybody and not have any modifications to it, because any modifications to it will require an additional level of programing," says Andrew Stettner, a senior fellow at the Century Foundation and leading unemployment insurance expert. There could be many more states added to the list as more Americans start to do their taxes and discover issues.Įxperts say that they're not at all shocked to see issues like this cropping up in multiple states, especially considering that many were trying to get their unemployment systems set up to process the new federal enhanced payments amid the pandemic as rapidly as possible. While CNBC Make It could only confirm the withholding issues in a handful of states, that doesn't mean it's not happening elsewhere as well, says Nicole Marquez, director of social insurance at the National Employment Law Project. The spokesperson said Hawaii did withhold taxes when requested from the $600 FPUC payments and standard unemployment benefits. ![]() Workers in Hawaii have also reported issues with withholding taxes on all or some of the federal employment programs, according to Elizabeth Pancotti, policy director at Employ America.Ī spokesperson for Hawaii's Department of Labor and Industrial Relations confirmed to CNBC Make It that while workers may opt in to having state and federal taxes withheld, the state did not withhold taxes from the $300 payments made through the LWA program or the Pandemic Unemployment Assistance (PUA) program designed for gig workers, independent contractors, the self-employed and those who would normally not be eligible for unemployment. Minnesota's Department of Employment and Economic Development did not respond to requests for comment. She now owes over $1,000 in taxes to her state and her federal return was reduced by over $2,000. ![]() While she also opted to have 10% withheld from every payment for taxes, she similarly discovered that the withholding was only applied to her standard unemployment benefits. A Minnesota resident, who asked that her name be withheld to protect her privacy, tells CNBC Make It that she collected over $16,400 in unemployment benefits last year. It's not just California where unemployed Americans are finding that only part of their benefits payments were withheld. It's not just California that didn't withhold taxes Levy did not comment on whether this was also the case with the $300 enhanced unemployment payments. "This withholding option was not available for the $600 pandemic additional compensation payments, which needed to be quickly implemented at the time to get benefit funding to eligible claimants in need of them," says Loree Levy, deputy director of public affairs. "People who don't have jobs are on the hook to come up with this money in a time when money is very difficult to come by," Nichols says.Ĭalifornia's Employment Development Department said in an emailed statement to CNBC Make It that out-of-work residents are given the option to withhold on standard state-issued unemployment insurance and federal pandemic unemployment assistance benefits. ![]() Otherwise, she's planning on taking money from her individual retirement account (IRA) to cover the extra expense. Nichols is waiting to file her 2020 taxes in hopes that the $1,400 stimulus payments will hit her bank account before her taxes are due and can help her cover her tax bill. "I think it would have been a safe assumption if you check a box to withhold taxes, that you withhold taxes from all the money that they're going to be sending you." "I don't understand why, when I told them to withhold the 10%, they only withheld it from the actual unemployment money, not what I call the 'bonus money,'" Nichols says. ![]()
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