Millions of Americans survived on unemployment benefits last year. Now they owe taxes they can’t pay on those benefits. That’s because taxes weren’t withheld from the benefits.
Why are unemployment benefits taxed in the first place?
Because the father of “trickle down” economics convinced Congress that not taxing unemployment benefits would make people “lazy.” Read story here.
That’s Martin Feldstein (photo, with George W. Bush), a Reagan adviser and conservative economist whose opposition to Social Security, unemployment benefits, and minimum wage laws helped shape decades of Republican economic policies.
If you’re one of those unemployed people about to get socked with a hefty tax bill on your survival income last year, and would like to give Mr. Feldstein a piece of your mind, you can’t. He died in 2019. If you would like to spit on his grave, you can’t do that, either. He was cremated.
What you can do is contact your congressman and senators and ask them to support the Coronavirus Unemployment Benefits Tax Relief Act introduced by Sen. Dick Durbin (D-IL) and Rep. Cindy Axne (D-IA). Read about it here.
In case you’re wondering about those stimulus payments, they’e not taxable. Technically they’re tax credits, so the IRS treats them as tax refunds, not income. This also means that if you didn’t receive your stimulus payments, or received an incomplete payment (i.e., you didn’t get money for your children), you can still collect that payment by claiming it as a tax credit on your 2020 tax return.