Taxes on Unemployment

[happystuff]

Whether it's a discussion of plan-A vs plan-B, or where to eat lunch, or which method is the best way to do something, every conversation that involves two different opinions is an effort by each person to convince the other person that they're right. If you don't think you're right or if you don't think you can get the other person to consider the possibility that you're right, then there's no point in having the conversation.

Often a conversation will result in two people finding a common ground where their opinions overlap, but just as often the conversation will end with one person saying "Obviously we disagree about this" and changing the subject. Both results are ok.

IMO 25% of what I know is either stuff I learned from research I did in order to defend, or try to defend, something I believed, or it's based on valid arguments that someone used to refute my beliefs during a casual conversation. And that is how it should be.

If what you believe isn't worth defending, why waste time talking about it?

And I guess that is the difference between us - I don't go into conversations like they are a battle to "win" or "lose" or even to "defend" or convince someone that "I'm right" about something. I converse to learn about people, what they think, what they have to say, differing opinions/ideas/etc and to share my own opinions, thoughts and beliefs. I try to respect other people to have their own opinions without trying to "convince" them of something. That is not a waste of time for me. So, now that I understand how and why you engage in conversation, thank you for the explanation/discussion and have a nice day.

[GeorgeParker]

I converse to learn about people, what they think, what they have to say, differing opinions/ideas/etc and to share my own opinions, thoughts and beliefs. I try to respect other people to have their own opinions without trying to "convince" them of something. That is not a waste of time for me.

It sounds to me like we both approach conversations exactly the same way, it's just that I'm more conscious of wanting to either teach something or learn something or at least exchange enough information to make both of us think more deeply about the subject. To me, shallow conversations about nothing in particular are ok and a social necessity, but they're not my cup of tea.
Go in peace, live long, and prosper.

[Accrual World]

I too have been unemployed, and I got less than $348 per week. Given a choice between withholding or not withholding. I chose to not withhold because I'd rather earn interest on that money instead of lending it to the government for free.

My opinion has nothing to do with the extra covid unemployment payments. I'm talking about the smart thing to do with any income where you have the option to withhold or not withhold taxes.

It is always better to receive interest than to loan money to someone for free. Period. If a person doesn't have the willpower to stash that tax money in a savings account, then to thine own self be true and let the government withhold it. But that isn't the smart thing to do.

As far as people with small unemployment checks needing to have the income tax withheld because if they have it in their hand they'll probably spend it instead of saving it: Which is better: to buy food and pay your rent, or to give the government an interest-free loan and go hungry?

Imho it is better to have enough money to pay rent and buy food and pay for other necessities, even if you end up owing more income tax than you can pay and having to pay the relatively low interest rate the IRS charges you for not paying your taxes on time.

To be clear about my intention: When you say "Anyone who is smart about it will have the taxes taken out" what that really means is anyone who doesn't have income tax withheld is being dumb. Well, I am not dumb, and imho it is smarter to not have income tax withheld if you have that option. YMMV

Absolutely agree on this point and, as a tax professional, this is the advice I give most friends when they do their withholdings. Getting a refund is not "winning"

Especially for people that are struggling to get by. Every dollar received sooner in the year allows for more flexibility so that you don't end up borrowing and paying interest.

I always owe money when I file my taxes. As long as you're above the safe harbor to avoid an underpayment penalty (the lesser of 90% of taxes due current year or 100% of taxes owed prior year), you're good.

[Tradd]

Just an fyi for anyone who had received unemployment, including the bonus $600 per week, I got an email about filing. It says, in part:

You are responsible for paying federal income taxes on any < my state> Unemployment Insurance benefits you received in 2020. The attached file (1099-G) includes the amount of unemployment benefits you collected and what amount, if any, was withheld from your benefits for tax purposes.

If you received Unemployment Insurance, Pandemic Unemployment Assistance, Pandemic Emergency Unemployment Compensation or Extended Benefits, you may have chosen to withhold 10% of your benefits for tax purposes. That option was not available for the supplemental $600 Federal Pandemic Unemployment Compensation (FPUC) or $300 FEMA Lost Wages Assistance payments. You are responsible for paying any required federal taxes on any unemployment compensation payments you received in 2020.

I had a feeling, so I'm glad I saved as much of the extra as I did.

I got my statement Friday. I took the total of unemployment benefits paid and divided it by the amount of federal tax withheld. It was 10%. I found online that 10% is the only percentage taken out for fed taxes (other than 0%). So it appears the fed tax WAS taken out of the $600/week extra I received.

The notice you received about fed tax not taken out of the $600/week extra doesn’t seem to apply for IL.

[happystuff]

I got my statement Friday. I took the total of unemployment benefits paid and divided it by the amount of federal tax withheld. It was 10%. I found online that 10% is the only percentage taken out for fed taxes (other than 0%). So it appears the fed tax WAS taken out of the $600/week extra I received.

The notice you received about fed tax not taken out of the $600/week extra doesn’t seem to apply for IL.

Nice! Glad it was for you!

[Tradd]

Just heard that the new stimulus plan will waive taxes on unemployment for the first $10K or so. For those who’ve already field, don’t file amended returns. IRS will find a way to get it back to us. There’s a gal by the name of Terry Savage who is on WGN radio here in Chicago very often. She will be writing up a ton of stuff on the new stimulus plan later today on her website.

Terrysavage.com