The Internal Revenue Service today reminded people receiving unemployment compensation that they can have tax withheld from their benefits now to help avoid owing taxes on this income when they file their federal income tax return next year.

By law, unemployment compensation is taxable and must be reported on a 2020 federal income tax return. Taxable benefits include any of the special unemployment compensation authorized under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, enacted this spring.

Withholding is voluntary. Federal law allows any recipient to choose to have a flat 10% withheld from their benefits to cover part or all of their tax liability.

If a recipient doesn’t choose withholding, or if withholding is not enough, they can make quarterly estimated tax payments instead. The payment for the first two quarters of 2020 was due on July 15. Third and fourth quarter payments are due on September 15, 2020, and January 15, 2021, respectively.

4 thoughts on “Unemployment compensation is taxable; have tax withheld now and avoid a tax-time surprise”

    1. I don’t get unemployment and haven t received my tax return. In not married either nor do I owe child support. I don’t have children.Eli Sanchez.t

      1. My taxes are paying someone else’s child support and bills. They Dont even have the exact reason why this is happening?

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