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Did you Receive Unemployment Benefits?

October 8, 2020 by

UNEMPLOYMENT BENEFITS ARE CONSIDERED TAXABLE INCOME!
Unemployment benefits are considered income, and taxed at a rate of 10% for federal taxes and 5.05% for state taxes. You can choose to have your taxes withheld now, or pay them when you file your taxes. Here’s what that difference looks like:
WITHHOLDING TAX
If you choose to have your taxes withheld, the amount you owe for tax – 15% of your benefit – will be deducted automatically from your weekly payments, and you will not need to pay any additional money on your benefits when you file your taxes.
NOT WITHHOLDING TAX
If you choose not to have your taxes withheld, nothing will be deducted from your weekly payments, but you will be responsible for paying federal and state taxes – 15% of the total amount of unemployment payments you received – in one lump sum when filing your taxes.
EXAMPLE: Luis has a weekly benefit amount of $100
WITHHOLDING TAX
Luis chooses to withhold state and federal taxes from his benefits. He receives a weekly payment of $85 for 10 weeks. When he files his taxes, he does not owe any money from his unemployment payments. The total amount he receives after paying taxes is $850.
NOT WITHHOLDING TAX
Luis chooses not to withhold state and federal taxes from his benefits. He receives a weekly payment of $100 for 10 weeks. When he files his taxes, he owes $150 from his unemployment benefits. The total amount he receives after paying taxes is $850.

Choose whichever option works best for you, but don’t get caught off guard when filing your tax return next year! 

CONNECT will be offering FREE tax preperation services through the VITA Program starting in January 2021. Stay tuned for more information on how to access this service in the coming months! 

 

Not sure if your taxes are currently being withheld from your benefits?

Whether you are receiving benefits through UI or PUA, you can check and change your settings!
If you filed through the UI portal, you made a withholding selection when applying. If you filed through the PUA portal, you may have made a withholding selection when applying, or it was automatically selected to not withhold taxes. No matter whether you are receiving benefits through UI or PUA, you can double check and change your settings!
Regular UI Benefits
(UI Portal)
  1. Visit the UI Online portal (click here)
  2.  Log in by checking the box, entering your social security number two times, and entering your password.
  3. Select “View and Maintain Account Information” on the left side of the screen.
  4. Select “Payment Method Options”
  5. The next screen will show you your current payment method (Debit, Direct Deposit) and below that, there will be a section titled “Tax Withholding Selection.”
  6. This will show you if you are currently having taxes withheld or not.
  7. If you are not currently having taxes withheld and would like to change that, press the “Edit” button and select “Both Federal income tax at the rate of 10.00% and Massachusetts state income tax at the rate of 5.00%.”
  8. Remember to press “Submit” to save your changes.
Pandemic Unemployment Assistance (PUA Portal)
  1. Visit the PUA Portal (click here)
  2. Log into your account by entering your email and password.
  3. Click the “More…” tab, which is next to the “Action Center” tab.
  4. Scroll down to the box that says “Withholding Preference” and select “Update Withholding Preference.”
  5. This will take you to a screen with multiple choice options. You cannot see which option you currently have selected.
  6. If you want to have your taxes withheld going forward, select “Both Federal and State Withholding,” then select “Next” in the bottom right.
  7. Remember to select “Submit” to save your changes.
You can also update your withholding preferences by calling the DUA. 
Phone: (877) 626-6800
Hours: Monday through Friday, 8:30am – 4:30pm.
Note that changing your withholding preferences will only affect your payments going forward. If you were not having your taxes withheld before, you will still owe taxes from those payments when you file your taxes. 
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