Millions of Americans Could Be in for a Tax Shock. Here's Why
The coronavirus pandemic has caused an unemployment crisis unlike any other. While the jobless rate has declined since hitting a record high in April, millions of Americans are still out of work and have grown reliant on unemployment benefits to cover their bills. But it's these same workers who may be in for a very unpleasant surprise when they sit down to file their 2020 taxes next year.
If you've been collecting unemployment benefits, you may not realize that that income, like your regular paycheck, isn't yours to keep in full. While unemployment benefits aren't subject to the payroll taxes that are used to fund Social Security, you have to pay federal taxes on that income.
Generally, you'll be given the option to have 10% of your weekly benefit withheld for this purpose before you start collecting that money. Otherwise, you can collect your benefits in full and then make estimated quarterly tax payments to the IRS.
Source Fool.com
