Unemployment claims have reached record highs above levels ever seen in history. States are reporting unemployment claims upwards of 900,000 a week. As many people are desperately seeking assistance to make ends meet, many feel relieved by the news this week that an extension to, and addition of new, unemployment benefits may soon be available.
Unemployment Benefit Considerations
While unemployment benefits serve a great need for our citizens, they do not always come without a cost. In fact, there are silent consequences looming around the corner for beneficiaries of unemployment benefits that everyone should know about.
First, unemployment benefits are taxable. By law, unemployment compensation is taxable and must be reported on a tax return; this also includes the benefits provided under the Coronavirus Aid Relief and Economic Security (CARES) Act.
Therefore, it is suggested a beneficiary of unemployment compensation should withhold taxes at each benefit check to avoid owing those taxes at the time of filing. If taxes have not been withheld, the beneficiary should begin planning for their tax liability bill and begin working to have payment for the liability, or secure a payment option with the IRS.
Another consideration of unemployment benefits is how they are handled for individuals experiencing financial insolvency. Unlike other forms of debt, tax debts are higher priority and have fewer options for assistance if paying the debts is not possible. Generally, income tax debt is not eligible for a debt discharge in bankruptcy.
Whether you are facing financial hardship over the loss of a job or income, are currently receiving or in need of unemployment benefits, or have concerns about your tax debts; contact one of our Sacramento bankruptcy lawyers today.