Unemployment recipients: Here’s what you need to know before filing your taxes

Money

PROVIDENCE, R.I. (WPRI) — The IRS pushed the start of the 2020 tax filing season to Feb. 12, meaning there’s roughly three weeks until it begins.

With more Rhode Islanders than ever receiving unemployment benefits, Certified Public Accountant Erica Guatieri said it’s important to remember that pandemic unemployment assistance payments are considered taxable income.

When signing up for unemployment benefits, the form asks whether you want your federal or state withholdings taken out of those benefits. If you opted not to have those withholdings taken out, you may actually owe some taxes this year.

“Maybe you had federal [taken out] but you didn’t have the state,” Guatieri explained. “So, just be aware when you come to file because it could cause some tax liability.”

Ken Vargas, a spokesperson for the IRS, said the state will send you a form once tax season starts that you’ll need to submit when you file.

If you do owe money, he said there are options available to pay it back.

“You can do an installment payment and pay that overtime,” Vargas said.

There is a way to file federal taxes for free using the IRS website.

“You’ll see the partners we’re working with in the tax preparation industry that offer free filing for taxpayers who earn $72,000 or less,” Vargas said.

IRS free file usage doubled in 2020, according to Vargas, who said in Rhode Island more than 13,000 people utilized the tool.

“Some of these partners do also provide state income tax preparation,” Vargas said, adding that it differs per state.

If you worked last year, you may also qualify for an “Earned Income Tax Credit.”

“That’s for the lower income with some dependents or maybe not some dependents,” Guatieri said.

“We can give you $2,000 in returnable credit when you file your tax return,” Vargas added.

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