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Filing Your Taxes If You Claimed Unemployment Benefits: What to Know, Where to Find Help

The 2021 IRS deadline for filing your taxes has been pushed to May 17. If you claimed unemployment last year, here's what to know, and where to find free or low-cost help.
Mary Franklin Harvin
Young woman in a blue sweater looks intently at a laptop computer screen
La fecha límite del IRS de 2021 para presentar sus impuestos ha sido extendido hasta el 17 de mayo. Si el año pasado declaró ingresos de desempleo, le decimos qué debe saber y dónde puede encontrar ayuda gratuita o de bajo costo. (Liza Summer/Pexels)

This story contains a correction.

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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.

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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.

A screenshot of the EDD websi
A screenshot of EDD's website, showing various options for questioning issues with your 1099G form. (EDD)

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.

Should I Just Submit for an Extension on Filing My Taxes?

Spivey said she anticipates "a significant number of people that will not do [their taxes] this year, and then get charged penalties and interest." Sometimes people then experience a "snowball effect," she said. "They don't do one year and then it causes anxiety, and then they just don't do them for a couple of years."

Spivey strongly encouraged people to file their taxes to avoid getting sucked into this cycle. If you need more time, submitting for an extension via a Form 4868 will buy you until Oct. 15 to file your tax return.

If you're anticipating needing help to file, remember that filing after the official deadline will mean that many of the free and low-cost options for tax prep that would have been available before that date are no longer available. And speaking of tax help ...

Where Can I Find Free or Low-Cost Help Filing My Taxes, and When Will It Be Available?

Spivey said one of the main questions she’s getting lately is: "Who can still help me?"

That’s because a chunk of the free and low-cost support services close up shop on April 15, despite the deadline extension to May 17.

There is year-round tax help through groups like Tax-Aid. And though Spivey said there are no guarantees, with California planning to reopen its economy in mid-June after over a year of COVID-19 restrictions, you may also stand a better chance of finding in-person tax help in the coming months.

Spivey will also be holding a Facebook Live tax session on behalf of the clinic on April 22 at 10 a.m.

See our list of organizations offering free tax assistance in the Bay Area.

Free Online Help for Tax Filing 

Sept. 13: This story has been corrected to amend the earnings threshold listed for tax exemptions related to unemployment income. The exemption applies to single people or married people filing separately whose modified adjusted gross income is less than $150,000. The story originally stated that the threshold was $75,000 for singles or married filing separately.

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