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Important tax information for all those who filed for unemployment

IRS TAX FORMS
Posted at 3:30 PM, Mar 02, 2021
and last updated 2021-03-02 20:05:50-05

GRAND RAPIDS, Mich. — We’re less than two months out from Tax Day, and hundreds of thousands of Michiganders will have to make adjustments on their returns after filing for unemployment.

The biggest problem for a lot of people who’ve emailed FOX 17 is their state documents not matching their records. They claim the government took out taxes, but their 1099s show that’s not the case.

Even if you’re not in that group, there are new things you need to know when filing during a pandemic.

It’s the dreaded time of year for millions of Americans - finding the necessary paperwork to file your taxes. This year will be a bit different for tens of thousands in Michigan.

FREE TAX HELP

“And they’re not as normal as they have been in the past. So even if you normally file them yourself, you may want to seek out a site just to help because there are some specific changes,” said Scott Gumieny, accounting instructor at Davenport University.

They run one of the local “Volunteer Income Tax Assistance” programs. The federal initiative helps people file at no cost.

“Individuals and families earning less than $57,000, we will prepare your taxes for free,” said Gumieny.

One of the biggest issues their group is seeing is the earned income tax credit.

“Unemployment is considered not earned income, so if they’re receiving more unemployment than earned income, it could drastically affect that credit,” he said.

If you filed for benefits, you will owe state and federal taxes on them, even on the $600 weekly federal boost. Some people had those withheld, but others needed all the money they could get.

“So, just expect in those situations, because it is taxable earnings, a tax bill potentially. You can use other credits to offset the withholdings that you decided to forego to have more during the year, but there’s a higher potential that you will owe money,” said Gumieny.

We’ve also heard from people who are getting their 1099s showing that no taxes were taken out, but their payments on their MIWAM accounts show they were.

“So, it’s best for those clients those individuals to wait to file their taxes and try to get that corrected 1099 unemployment form that shows their withholdings,” Gumieny said.

Some filers also signed up for health insurance through healthcare.gov. If you didn’t submit your new income after getting unemployment, you may owe once those payments are calculated.

“They need to report that to the marketplace so they can get the correct insurance and but also get the correct premiums so that premium they paid is based on their income, and not just earned income but all sources of income,” he said.

As always, if you feel like your return will be a little more complicated, make sure you seek professional help. Don’t try to do everything on your own with an online tax program.

“If you’re knowledgeable with taxes and you have relatively simple sources of income and you’re working in one location, you can use Turbo Tax to complete your own or do your own taxes. But, this year is unlike any other.”

The VITA program has locations all over the state and country. Click below to find one near you.

VITA LOCATIONS

REBOUND RUNDOWN

The tax deadline for federal and state returns is still April 15th.

You only need to claim unemployment benefits you actually received.

If you get an incorrect 1099, you can request a new one from the state.

The IRS always allows a payment plan, so don’t worry if you can’t pay it all at once.

If you’re going somewhere for help, make sure you bring all your tax documents with you, including the 1099 for unemployed workers along with your ID and social security card.

The IRS will also send out forms 1444 and 1444-b for the stimulus payments.

So, if you didn’t get those and you’re eligible, they could be added to your return as a credit.

NEW THIS YEAR

If you donated cash to a charity you can deduct $300 on your return, and you don’t have to itemize.

If you had to pull money out of your retirement account early, you can declare relief from that because COVID is a natural disaster.

That means you won’t have to pay the 10 percent penalty for taking out up to $100,000.

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