Lost Wages Assistance is also Taxable

    Millions of Taxpayers have had to deal with unemployment for the first time in 2020. Some who were eligible in certain states qualified for Lost Wages Assistance (LWA) which added an extra $300 to $400 to unemployment benefits. This is provided by the Federal Emergency Management Agency (FEMA). However, the Department of Labor guidance clearly stated that LWA will be taxed, just like normal income.

     This might come as a surprise since LWA is a new program that is under the direction of FEMA, which does not consider itself to be unemployment insurance. Historically, unemployment benefits have always been taxed by the Internal Revenue Service (IRS). LWA is still considered to be taxable income, as it does not meet the requirements for disaster relief. Qualified disaster relief does not include income to replace lost wages. This situation can create an unexpected tax surprise next year. You can choose to have Federal Tax withheld from your payments now to avoid that. Talk to your Qualified Tax Professional now to find out how.

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