Скачать или смотреть Cares Act: 3 Ways To Avoid A Large Tax Bill Next Year

With millions of Americans out of work, many are depending on expanded unemployment benefits to get through the pandemic. While these benefits are a lifeline right now, they could be a cause a liability next tax season. Here is what you need to know about Cares Act: 3 Ways To Avoid A Large Tax Bill Next Year. Enjoy! Feel free to add me on Instagram: beck.zack

► Get 2 Free Stocks on WeBull when you deposit $100 (Valued up to $1400):
https://act.webull.com/i/L6YbjIyKSmv2...

► Robinhood Invite Code (grab your other free stock): https://join.robinhood.com/zacharb4799

► Save and invest automatically by trying out Acorns: https://www.acorns.com/invite/WBD6UJ

► Get $5,000 managed for free when you invest with Wealthfront:
https://www.wealthfront.com/c/affilia...

Unemployment Income Isn’t Automatically Taxed

Unemployment benefits are considered taxable income by the Internal Revenue Service (IRS). However, that doesn’t mean taxes are automatically taken out on unemployment payments like a regular paycheck.

Like other forms of compensation, unemployment benefits are subject to federal taxes. There is no requirement to have taxes withheld from unemployment checks, but doing so could prevent a large tax bill next year.

How to Prepare Now to Avoid a Tax Hit Later

While applying for unemployment benefits, it’s important you take note of the forms you’re filling out. Some states incorporate federal and state withholding during the sign-up period.

While enrolling in jobless benefits, you might be asked to fill out a Form W-4V. This IRS form allows individuals to request a flat 10% be withheld from their unemployment compensation.

You can pay your quarterly income tax payments every three months, with caveat: You’ll have to calculate your estimated payments on your own. IRS Form 1040-ES is a worksheet that walks you through the calculation to determine your estimated taxes.

Paying estimated quarterly taxes won’t be a viable option for everyone, though. Some taxpayers might be on such tight budgets while receiving jobless benefits that saving enough to pay estimated quarterly taxes is out of the question.

Failing to pay estimated quarterly taxes doesn’t mean you’ll be off the hook, though. There is a penalty for underpayment of estimated taxes (though you can request it be waived in certain instances with Form 2210), but Cagan says it comes down to prioritizing needs, especially during the coronavirus crisis.

What About Lost Wages Assistance (LWA)?

In early August, President Donald Trump signed a memorandum to extend additional unemployment benefits through Federal Emergency Management Agency (FEMA) funds. The benefits, referred to as lost wages assistance (LWA), provides an additional $400 per week (since states are responsible for 25% of the cost and regular state benefits can go toward that cost, it could come out to an additional $300 per week). Most states have already been approved to receive and provide this additional aid.

When it comes to taxes, however, these additional payments should be given extra consideration. Since Trump’s memorandum provides more money to individuals, that’s more money that can be taxed—and more money individuals could owe to the government next year.

How the Earned Income Tax Credit (EITC) Could Help

If you’re worried you might face a large tax bill in April, see if the Earned Income Tax Credit (EITC) can help offset those costs.The EITC can provide between $538 and $6,660 in tax credits, depending on earned income amounts and number of dependents. The 2020 income limit for EITC is $15,820 for single filers and $21,710 for married couples filing jointly, according to the IRS. If that sounds confusing, it is. Fortunately, the IRS has an EITC Assistant to help you estimate whether you’ll be eligible for this important tax benefit for 2020.

DISCLAIMERS & DISCLOSURES

This content is for education and entertainment purposes only. The Zack Beck Show does not provide tax or investment advice. The information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. All investing involves risk, including the possible loss of principal.

This description contains affiliate links that allow you to find the items mentioned in this video and support the channel at no cost to you. The Zack Beck Show is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to www.amazon.com. Thank you for your support.