Dear Jason,

I have been receiving unemployment payments for the past few months.  How will this affect my taxes?

Jim

Hi Jim,

As you are probably aware, many individuals received a larger than normal unemployment check thanks to an additional $600/week that the Federal government was providing to help during this unprecedented time.  The additional $600 ended 7/31/20 and has been replaced with an additional $300 for most people in most states.  This means that many people like you will be receiving significant payments from unemployment.  The unemployment is taxable as ordinary income, and many are having little to nothing withheld from their weekly payments. I would recommend working with a CPA to project your tax liability.  They could also provide you with suggestions for how to pay your taxes this year and avoid/minimize the under-withholding penalty.

Sincerely,

Jason