Over the last several months millions of Americans have received taxable unemployment compensation for the first time due to the impact of the COVID-19 pandemic.
That’s why today we’d like to remind you that unemployment compensation is taxable, and it’s advisable to retain those taxes now to avoid owing them when you file your return next year.
The taxable benefits include all those special unemployment compensations authorized under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
These are some of the payments for which you should check your withholding:
- Unemployment compensation includes: Benefits paid by a state or the District of Columbia from the Federal Unemployment Trust Fund
- Railroad unemployment compensation benefits
- Disability benefits paid as a substitute for unemployment compensation
- Trade readjustment allowances under the Trade Act of 1974
- Unemployment assistance under the Disaster Relief and Emergency Assistance Act of 1974, and
- Unemployment assistance under the Airline Deregulation Act of 1978 Program
Remember: Withholding Is Voluntary
The law allows you to retain a flat 10% to cover all or part of your tax liability. If you decide to proceed with the withholding, then fill the Form W4V-Voluntary Withholding Request and remember that you are not supposed to send the form to the IRS, but to the agency that pays the benefits. If that agency has its own form, then use that form instead.
In case you decide not to withhold, or if your withholding is not enough, then you can make a quarterly payment of estimated taxes. These are the deadlines for the payments:
- For the two first quarters of 2020: deadline expired July 15, 2020
- For the third quarter of 2020: deadline expired September 15, 2020
- Fourth quarter of 2020: deadline January 15, 2021
If you return to work before the end of the year, you can use the IRS Withholding Estimator to verify that your employer is taking enough tax out of your pay.
Learn More About Taxes
These are some previous posts with useful tips to help you navigate with confidence the world of taxes:
- These are your options if you didn’t file your taxes on time
- Do you know what is your tax filing status?
- 4 Tax-related scams to avoid
- Expecting a tax refund? Here’s everything you need to know
- Remember this important thing when you get your Economic Impact Payment
- The 4 most common questions about Economic Impact Payments
Contact the Tax Experts at Delgado’s Insurance
If you are looking for assistance with your Income Taxes in Bloomington or Riverside, at Delgado’s Insurance our mission is helping you make sense of your options to reduce your liability and maximize your deductions while staying compliant with all relevant laws and regulations.
We have locations in Riverside, California, and Bloomington, California. Contact us today by telephone (951-361-0084, 909-421-9003), email (firstname.lastname@example.org), or through our social media accounts (Facebook, Twitter) to get a free quote and learn more about our wide array of services.