You got unemployment pay after losing your job. The government wants part of it back

BOISE (Idaho Statesman) — You received coronavirus emergency aid money from the state. Yay!
Soon, the other shoe will drop. You have to pay taxes on it. Boo!
Idaho handed out $23.3 million under Gov. Brad Little’s program to induce people to get off unemployment rolls, with people offered $750 to $1,500 bonuses to go back to work.
Small businesses and self-employed people received $56.6 million in Rebound Idaho cash grants of up to $10,000 apiece. Sixty-one percent, $34.2 million, went to companies with one to five employees. Self-employed people received 29%, $16.6 million.
The payments are considered income by both the state and federal governments, so they will affect your 2020 taxes due next April 15.
“We’re giving folks an early heads-up about their taxes,” Tax Commission Chairman Tom Harris said in a news release. “We want them to have time to plan so they’re not caught off-guard when they file next year.”
Idahoans who receive unemployment compensation — and nearly 194,000 initial claims have been filed since pandemic layoffs began in mid-March — should already know that those payments are taxable. The Idaho Department of Labor tells them so and offers to withhold 10% for federal taxes.
The department offers an online page of questions and answers on income tax implications.
The Idaho Tax Commission suggests that people who didn’t have withholding subtracted from their benefits set aside money to go toward the tax or make estimated payments online through the commission’s free Quick Pay service.
For workers who were laid off and later returned to work, the Internal Revenue Service has an online calculator to ensure that enough money is withhelding from paychecks to cover next year’s income tax bill.
Without sufficient withholding, recipients may owe more in taxes next April, or they may receive a smaller refund than they expected. The amount of unemployment compensation paid to a recipient will be totaled on a Form 1099-G, issued by the Idaho Department of Labor in January.
“People can decline to have taxes withheld, but that doesn’t mean taxes don’t need to be paid,” Internal Revenue Service spokesperson Karen Connelly said by phone from Denver.
The federal Paycheck Protection Program loans to businesses aren’t taxable, either, if the money is used as Congress’s coronavirus-relief law intended so that the loans eventually are forgiven. But payroll and other expenses that a business incurs with PPP money appear not to be deductible, so many businesses might not save much.
One payment that won’t incur any federal or state taxes is the $1,200 coronavirus stimulus check ($2,400 for couples) sent out to qualifying taxpayers last spring. That money is not considered income and was provided tax-free. Woo hoo!
Source: eastidahonews.com