TAXES 101: Tax Tips for the Unemployed Amidst the Outbreak

According to the U.S Department of Labor, 26.5 million Americans have marked themselves as unemployed. These numbers don’t account for the other 7.1 million who were unemployed before the greater part of the country would close its shutters in response to the outbreak.

The CARES LAW was enacted on March 27 by the President of the U.S, which included benefits for the jobless, for freelancers, and part-time workers. The amount that each one is paid varies by state; however, it is nearly equal to half of one’s previous salary. The amount will be generally payable for 39 weeks.

Additional Benefits

Along with these benefits, the government will also help individuals by assisting them with an extra $600 per week. Every state has its guidelines regarding eligibility conditions. Generally, a person is deemed qualified if he is unemployed, not because of his fault, and is suitable for work and meets other requirements as indicated by the state. These numbers account for half of the story.

There is plenty of things to consider, including how to cover the tabs, acquiring a new job, and calculating the benefits related to unemployment. Within all this chaos, the thing you don’t need right now is tax-worries, but this doesn’t mean that you should postpone them till next year, as you have got the upper hand over the tax benefits now. Here are some tips that will help you in sorting things out.

Tax benefits

Unemployment benefits are taxable under federal income tax rules. So, don’t spend your benefits without contemplating the results. You also have the right to withhold federal income tax from the assistance you received from the government.

This is just like withholding on your salary check, which in turn means that you’ll owe less at the tax time. In case you are stressed that at tax time, you might owe more, consider assessing your estimated payments for the year to avoid a possible penalty. It is worth mentioning here that IRS has deferred punishment and interest on all kinds of taxes initially payable by April 15, 2020.

Retirement plan

If you are not a part of any potential pension plan, for example, IRA, then any withdrawals made from your retirement plan or pension plan will be taxed.  According to the CARES Act, the tax won’t be deducted at once, but you’ll have the option to pay it back in three years. Contact a tax professional to get details about how your retirement income and other benefits will be treated at the end.