Unemployment. How does it get taxed?

[HeatherC]

Posted this on the budget board as well. Curious about this. If someone qualifies for say $500 a week, do they get a check for $500 and pay taxes on it later at tax time? Or do they tax it right away so the check isn’t the entire $500?

 

[HeatherC]

Well just googled it anyway. It is taxable and here in MA you can decide to have it taxed weekly or later.

 

[dish rag]

Posted this on the budget board as well. Curious about this. If someone qualifies for say $500 a week, do they get a check for $500 and pay taxes on it later at tax time? Or do they tax it right away so the check isn’t the entire $500?

Why would you ask that on the budget board?

 

[mikehn]

Theoretically, Congress can change the tax law anytime they want. If they want, and if they can all agree to do so. But you know how that goes. Same for your state. The best strategy in my opinion is to take the benefit before taxes becasue you never know how the tax laws will change next year.

 

[debster812]

I have a yearly layoff every year, as I work for an outdoor construction company in MA. You can choose to get taxes taken out of each check, or take your whole amount and pay it later.

when I’m collecting, I have the taxes taken out, just because it’s easier.

 

[HeatherC]

Why would you ask that on the budget board?

Because people “ budget” their money”???

 

[disneychrista]

Short answer - it depends.

California allows 10% Fed tax to be deducted/paid at the time of payment. It is optional.

 

[dish rag]

Because people “ budget” their money”???

I guess I look at that a different way.

 

[AuntieMe3]

So I have a unemployment question maybe someone can answer....I work at a child care facility that is still open but there have only been 2-3 kids(essential parents) a day, so the owner is the only one working... she told me I could come in for hours if I want but I told her I didn't need to unless she absolutely needed me so she didn't have to pay me when I'm not needed and she's not making money. A friend said I should file for unemployment...if I were to do that, does that affect my employer? Is she paying my unemployment or does she gets some kinda fine or something....lol I'm not sure how it works... never had to do it before and I don't want to make her payout anymore right now when her business is hurting, ya know. Hubby is an essential worker so he's still working and getting paid but we're a little tighter than I like without my pay.

 

[jpakstis]

Well just googled it anyway. It is taxable and here in MA you can decide to have it taxed weekly or later.

That's exactly right. You can elect to have taxes withheld week-to-week or you have to declare on your taxes at the year-end. There is a specific line in the federal and state taxes (at least in MA) for a filing person's unemployment insurance income.

 

[sonnyjane]

Short answer - it depends.

California allows 10% Fed tax to be deducted/paid at the time of payment. It is optional.

Washington also.

 

[jpakstis]

So I have a unemployment question maybe someone can answer....I work at a child care facility that is still open but there have only been 2-3 kids(essential parents) a day, so the owner is the only one working... she told me I could come in for hours if I want but I told her I didn't need to unless she absolutely needed me so she didn't have to pay me when I'm not needed and she's not making money. A friend said I should file for unemployment...if I were to do that, does that affect my employer? Is she paying my unemployment or does she gets some kinda fine or something....lol I'm not sure how it works... never had to do it before and I don't want to make her payout anymore right now when her business is hurting, ya know. Hubby is an essential worker so he's still working and getting paid but we're a little tighter than I like without my pay.

In Massachusetts at least, the employer has already paid the unemployment tax for each employee before someone files a unemployment claim. So your employer does not get dinged going forward if you file a claim.

Also, someone can work part-time and still collect benefits. You can even collect your full unemployment benefit even while working part-time. You can only earn up to 1/3rd of your weekly benefit though. Say your unemployment is $600 per week; you can collect $200 per week and continued to collect your full benefit amount. You can also continue to collect above that 1/3rd threshold but it is reduced dollar-for-dollar until you reach your weekly benefit amount (so if you earn $201 part-time, you can receive $599 in weekly benefits).

 

[bcla]

I collected unemployment for a bit after getting laid off. Every two weeks I would get a form to send stating how much income I earned (one could still collect some with a tiny bit of income) and there was a box to check if I wanted to deduct 10% from my payment. Eventually I could fill it out online.

Not sure about your individual state, but in California, unemployment benefits weren't subject to state income tax.

 

[AuntieMe3]

In Massachusetts at least, the employer has already paid the unemployment tax for each employee before someone files a unemployment claim. So your employer does not get dinged going forward if you file a claim.

Also, someone can work part-time and still collect benefits. You can even collect your full unemployment benefit even while working part-time. You can only earn up to 1/3rd of your weekly benefit though. Say your unemployment is $600 per week; you can collect $200 per week and continued to collect your full benefit amount. You can also continue to collect above that 1/3rd threshold but it is reduced dollar-for-dollar until you reach your weekly benefit amount (so if you earn $201 part-time, you can receive $599 in weekly benefits).

Thank you so much.

 

[bcla]

In Massachusetts at least, the employer has already paid the unemployment tax for each employee before someone files a unemployment claim. So your employer does not get dinged going forward if you file a claim.

At least around here, unemployment programs are considered state-mandated insurance where the employer pays a premium. There's a certain threshold for claims where an employer's premiums will go up if there are too many unemployment claims for that specific employer. I've heard of some employers that will insist on claiming someone was fired for cause (which would not be eligible for unemployment) to avoid the increase in premiums.

I remember one employer that furloughed all employees 20%. We could either do it as taking off one day a week, or one week every five weeks. Strangely enough we were encouraged to file for unemployment, but it was kind of weird because there didn't seem to be any practical way to collect. I would note no income for a week (and there's a one week waiting period) and once I listed substantial income for the next week I was informed I was no longer eligible. There was supposed to be some way to do it, but I couldn't figure it out.

 

[jpakstis]

Thank you so much.

No problem! I'm a white-collar prosecutor in MA and we handle unemployment fraud. I always tell the Grand Jurors that if nothing else I'll teach them how to commit unemployment fraud! Coincidentally enough I was working on an unemployment fraud case while checking the DISboards and saw this thread.

Things right now are unprecedented. I think this new stimulus bill extends and tacks on extra money and weeks. I believe they may also be tax-free, but I don't know. Also I know our state's unemployment agency is getting slammed so I tell anyone who is filing and/or contacting them to be patient.

 

[seashoreCM]

It makes sense to tax unemployment compensation even during this crisis.

If you were unemployed and the unemployment payments just made up for what you did not earn then you would pay the same income tax as if you were not unemployed,

If you received more income overall after counting the unemployment payments then it is fair that you should pay more income tax.

It makes sense if unemployment compensation during this crisis should be no-fault with respect to employers,
1. Ex-employees would not be searching for work due to social distancing and quarantining and should not be disqualified from unemployment.
2. Generally the ex-employees are out of work because of government mandate.

It should be easier and quicker to process the unemployment vlaims because no thinking let alone analysis or investigation is needed to approve the applications; all blanks should be summarily filled in to approve the claim.

 

[Deploraboo]

They’ll do what they did in the financial crisis and make UE bennies non taxable.

 

[dish rag]

They’ll do what they did in the financial crisis and make UE bennies non taxable.

How do you know they will do this again?

 

[Deploraboo]

Common sense.