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August 20, 2020
IRS reminds: unemployment is taxable income

This year, U.S. unemployment jumped from a historically low 3.5% in February to 14.7% in April and remained at 10.2% in July. The pandemic-induced spike impacted many long-term employees, especially workers in industries vulnerable to social-distancing mandates. First-time recipients are often surprised to learn that unemployment benefits are taxable. As such, the IRS reminds us, they are.

To the contrary, CARES Act stimulus payments are not taxable, because they are an advance on a refundable tax credit.

Recipients anticipating tax liability may request that tax be withheld from benefits. In addition, individuals are always permitted to pay quarterly, estimated income taxes.

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