Millions of Americans have received Unemployment compensation this year as a result of COVID-19 restrictions and shelter in place orders. What many don’t know is that unemployment compensation, including CARES Act and EDD Benefits, is taxable income. This tax season it will not come as a surprise when many who lost their jobs as a result of COVID will also be hit with an unexpected tax bill instead of a refund.

In January 1099 forms will be issued to all individuals who received unemployment income.  If you anticipate receiving further unemployment income, you may want to fill out a W-4 form and submit to the EDD department to voluntarily withhold taxes for next year.

Many who are struggling with debt often look forward to their Tax Returns as an opportunity to pay off debt or file for bankruptcy. If you are looking at a chapter 13 bankruptcy, it is best to file your 2021 taxes to confirm any debt owed to the IRS so that it can be included in your chapter 13 plan.  For more information call your Modesto bankruptcy attorney at (209) 438-4990.

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