Make Sure to Withhold Unemployment Tax!

    Millions of Taxpayers have, or are currently, receiving unemployment funds. Many are doing so for the first time due to the COVID-19 pandemic. Those who are taking part in this compensation need to know that it is taxable income. These benefits will be reported to the Internal Revenue Service (IRS) and must be stated on your Federal Income Tax Return for the year it was received. This would include the extra compensation provided by the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

    To avoid surprises next year, Taxpayers can choose to have tax withholdings applied right now. Usually the agency has their own form for this use. If you do not choose voluntary withholding, estimated quarterly payments can be made. Either way, for those who have received any unemployment compensation this year can expect a Form 1099-G next January. It will list the amount of unemployment income for this year and the amount of tax that was withheld. This income must be included on your Federal Tax Return for the year 2020.

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