This article is part of a series on personal finance during the coronavirus pandemic. Please check out the Coronavirus and Your Finances Series (link will open in a new window).
The difference between death and taxes is death doesn’t get worse every time Congress meets.
Since the COVID-19 virus hit U.S. shores, the economy has been slammed.
March 26, 2020 saw a record 3.3 million people file for unemployment.
On April 2, 2020, that record was blown away, as 6.6 million people filed for unemployment.
That unemployment number is probably still low given that many states are unable to handle the processing of unemployment claims in a timely fashion.
If you have lost your job as a result of the coronavirus pandemic, the Coronavirus Aid, Relief, and Economic Security Act, otherwise known as the CARES Act, created programs designed to help you out.
Namely, two programs will help you during your time of unemployment. They are the Pandemic Unemployment Assistance (PUA) program and the Federal Pandemic Unemployment Compensation Program (FPUC).
The government loves acronyms.
Between the two programs, the federal government is supporting state unemployment programs in getting unemployed workers who qualify their unemployment checks. For the first 26 weeks, that amount is $600 in addition to state unemployment compensation, which ranges from $235 per week in Mississippi to $823 per week in Massachusetts. For another 13 weeks, the federal government will pay $600 per week.
However, this is not free money.
According to the Internal Revenue Service, unemployment compensation is considered income. You will receive a Form 1099-G, for taxable government payments that you receive. That income must be reported on the Form 1040.
However, if you’re short on money, and you’re forced to make a decision between having taxes withheld and paying your rent, then you can file a Form W-4V changing your withholdings.
If you really are that tight on cash, then I’d recommend not withholding any taxes. You can always make estimated tax payments later once you get a job, or work out a payment plan with the IRS when taxes are due.
The IRS has a tool to determine whether or not your unemployment payments are taxable, and you can use a tool like the Intuit TurboTax Taxcaster to estimate how much tax you’re going to owe at the end of the year to see if you need to withhold taxes now on your unemployment income.
If you have lost your job due to the COVID-19 pandemic, you can also check out “What Should I Do If I Lost My Job Because of the Coronavirus Pandemic?“