![]() ![]() Depending on your state, this may be something you can do online through the benefits portal. To request withholding, you need to fill out form W-4V (the "V" stands for voluntary). You should be able to change or stop withholding at any time. ![]() If you are still unemployed and receiving benefits, double check that you've opted into withholding. That means an average worker who was laid off on March 15 during the initial wave of stay-at-home orders and who was unable to find work last year would have received a total of $27,315 in unemployment payments, assuming they were eligible for state benefits and all of the enhanced payments, according to the Century Foundation report. All of that is considered taxable income. In addition to regularly applied unemployment insurance payments, Americans could have received $600 weekly enhanced unemployment benefits for 17 weeks, plus an additional seven weeks of $300 weekly boosts. That means millions of workers could owe "thousands of dollars per family" in unemployment benefits on their 2020 taxes, according to Galle and Pancotti. And many out-of-work Americans could not afford a 10% reduction in their benefits. State unemployment agencies are required to offer the option to withhold 10% of benefits for income taxes, yet the Century Foundation reports that not all states immediately set up this option. Additionally, seven states - Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming - do not levy any state income taxes. If you live in states like California, Montana, New Jersey, Pennsylvania and Virginia, your unemployment benefits are tax-exempt. Some states waive income taxes on unemployment checks. While those on unemployment don't have to pay Social Security or Medicare taxes - typically about a combined 7.65% rate - you do have to pay federal income taxes and state taxes in some jurisdictions. That's important because unemployment benefits are considered taxable income, including the $600 and $300 enhanced benefit payments that lawmakers approved last year. Yet researchers estimate that only 40% of unemployment payments in 2020 had taxes withheld. ![]()
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