$580B in unemployment insurance benefits, expansions, & supplements saved tens of millions of jobless workers last year. Swaths of beneficiaries are about to be on the hook for huge surprise tax bills. We can't let that happen.
With @BDGesq & @TCFdotorg: https://tcf.org/content/report/the-case-for-forgiving-taxes-on-pandemic-unemployment-aid/
With @BDGesq & @TCFdotorg: https://tcf.org/content/report/the-case-for-forgiving-taxes-on-pandemic-unemployment-aid/
We estimate that <40% of UI payments had taxes withheld last year. Unemployed workers can opt-in to 10% federal tax withholding (and sometimes 5-10% state) on UI payments. But when UI checks are 30-40% of your former wages, you probably can't afford to reduce them any further.
Tax filing season starts in 4 days. The 40 million workers who claimed UI last year (many of whom are still on UI) will soon face tax bills that could be >$1000, and payments will be due just as extended UI expires.
We have two options to address this:
- Congress could exempt UI income in the next stimulus package (being fully drafted this week).
- Treasury could rule some or all of these benefits as non-taxable through existing law.
However it happens, it should happen immediately.
- Congress could exempt UI income in the next stimulus package (being fully drafted this week).
- Treasury could rule some or all of these benefits as non-taxable through existing law.
However it happens, it should happen immediately.
Last month, @SenSanders: "Through reconciliation, we must make sure that unemployment benefits during this crisis period are not taxable so that workers don't get hit with a huge tax bill they didn't expect."
We agree, Senator. Let's get it done. https://amp.cnn.com/cnn/2021/01/19/opinions/democrats-agenda-joe-biden-administration-sanders/index.html
We agree, Senator. Let's get it done. https://amp.cnn.com/cnn/2021/01/19/opinions/democrats-agenda-joe-biden-administration-sanders/index.html
The effects of tax forgiveness would be huge for many families. In addition to clearing debt owed to the IRS, it would also mean large refund checks would be cut to workers who experienced job loss. Given the timing, it's effectively another round of very targeted stimulus checks
Taxing UI benefits disproportionally affects low-wage workers and workers of color.
- Jobless spells are longer for these groups (meaning their UI income is higher, and tax liabilities will be higher if not waived).
- UI income reduces EITC amounts, harming low-income households.
- Jobless spells are longer for these groups (meaning their UI income is higher, and tax liabilities will be higher if not waived).
- UI income reduces EITC amounts, harming low-income households.
In reality, this exemption should've happened months ago. @SenatorDurbin introduced a bill exempting $10.2k of UI income in September 2020. Congress has, thus far, failed to act and now the administrative burden for exemption and fear among unemployed workers grows by the minute.
Joyce Pas, a member of @unemployedact who has been out of work since March, told us that exempting taxes on UI would help her spend her UI checks on things like rent and food, rather than paying the IRS money she shouldn't even owe.