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The 2021 IRS deadline for filing your taxes has been pushed to May 17 to give people more time to get organized in the wake of the COVID-19 pandemic.
Even with this extra time, your situation is likely to be even more complicated if you’ve been unemployed during the course of the pandemic — since you have to pay taxes on federal unemployment if you earned above a certain amount in benefits.
With the new IRS tax filing deadline now less than a month away, here's what you need to know about filing your taxes if you've claimed unemployment benefits this year — and where you can find free or low-cost tax help, even after many such support services closed up shop on the original IRS deadline of April 15.
I Received Unemployment Benefits in 2020. How Are They Taxed?
Unlike many other states, Californians do not have to pay state income tax on unemployment benefits.
Unemployment benefits are subject to federal taxes, but the American Rescue Plan created new thresholds for what’s taxable in this case.
If your modified adjusted gross income (AGI) is less than $150,000, for singles or married people filing separately, you don’t have to pay taxes on the first $10,200 of 2020 unemployment benefits you earned. For married people filing jointly, if each spouse received unemployment, this exemption applies to the first $10,200 worth of benefits for both individuals. If your modified AGI is $150,000 or more, this exemption does not apply to you. And the threshold stays the same for all statuses — it will not double to $300, 000 if you are married and filing a joint return, for example.
If you file a Form 1040-NR (or U.S. Non Resident Alien Income Tax Return), the IRS says your spouse isn’t eligible for the tax break on the first $10,200 worth of benefits.
According to the Employment Development Department (EDD), Pandemic Additional Compensation — that extra $600 federal benefit bump people got from March until late July, and the extra $300 federal benefit bump people started getting in late December — is taxable and must be included in your gross income. However, don’t confuse this money with one-off stimulus checks from the U.S. government (most recently $1,400), which are not taxable. Read more about pandemic federal benefits if you're claiming unemployment in California.
What Kind of Unemployment Documentation Do I Need For Filing My Taxes?
If you received unemployment benefits in 2020, EDD should have already sent you your 1099G form, which is a record of the total taxable income EDD has issued to you in a calendar year.
If you haven’t gotten this form for some reason, you can print one or request a paper copy through your UI Online account on EDD’s website.
EDD recommends that if your 1099G form shows a $0 amount, you should call 1-866-401-2849 (Monday through Friday, from 8 a.m. to 12 p.m.) You can also report form problems online.
What If I Didn’t Collect Unemployment Benefits in 2020, but I Still Received a Form 1099G?
Considering EDD has already confirmed it’s paid out more than $10 billion in fraudulent claims, there will certainly be tax forms going out to people whose identities have been used to file fake claims.
If you get a form documenting funds you never received, EDD says to call 1-866-401-2849, but “I would encourage people to use the online tool versus trying to call,” said Amy Spivey, director of the UC Hastings Low-Income Taxpayer Clinic.
You can report fraud on your 1099G form on EDD's site. Just follow the topic boxes.
If you feel there is an error on your 1099G form and can’t get an amended one from EDD before filing time, make sure you don’t report that income when you file your taxes.
According to Spivey, if there’s a mismatch between the earnings on your return and a 1099G the IRS has for you in its system, you’ll likely get a notice flagging underreported income. "And then at that point, you could respond directly to the IRS as well," advised Spivey. The downside of that, she said, is that if you're eligible for a refund, it could delay it.
How Do Withholdings Work With Unemployment Income?
"You aren’t required to take any tax withholdings from your unemployment," said Spivey — but you could have opted in to a flat 10% withholding previously.
Spivey said most people she’s seen through her work haven’t had withholdings on their unemployment benefits. "I had expected that this was going to be a big problem for the 2020 tax filing season," said Spivey, "but ultimately, I don’t think it’s been much of an issue."
She attributed that to the exemption thresholds put in through the American Rescue Plan.
