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WHO SHOULD NOT PAY TAXES TO THE IRS FOR UNEMPLOYMENT ASSISTANCE?

IRS FOR UNEMPLOYMENT ASSISTANCE

You don’t know who does not owe taxes to the IRS for unemployment assistance, here we explain it to you.

Many people are unaware, but all unemployment benefits, including those extended by the pandemic, are taxable.

Due to provisions that were enacted under the “American Recovery Plan” by the Biden Administration, unemployment benefit recipients will not have to pay taxes to the IRS in some cases.

Unemployment benefits are taxable income and are therefore subject to both state and federal income tax. This includes pandemic supplemental benefits such as Pandemic Unemployment Assistance (PUA) and Pandemic Emergency Unemployment Compensation (PEUC). But, many people do not comply with the tax requirements, most often due to lack of knowledge, which leaves them in debt to the Internal Revenue Service (IRS).

The $1900 million stimulus package that was passed this month in the U.S. Congress states that there will be an exemption from IRS liability if certain requirements are met.

THOSE WHO DO NOT OWE TAXES

A new law has established not only an extension of federal assistance for the unemployed of $300 a week through September, but has also determined that taxpayers who received assistance because they became unemployed in 2020 will not have to pay taxes on the first $10,200 of benefits for individuals.

For married individuals, in guidance on the new exclusion, the IRS has said that those who are married, each spouse receiving unemployment compensation should not pay taxes on unemployment compensation up to $10,200. 

This exception applies during this tax season, which ends May 17, after the IRS extended the tax filing deadline.

For state taxes, some states such as Alabama, California, Montana, New Jersey, Pennsylvania and Virginia have already decided that they will exempt citizens from the obligation to pay unemployment funds received. But it is up to each state to decide whether or not to apply the exemption.