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Unemployment affect tax returns?

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Anonymous
Not applicable

Unemployment affect tax returns?

Good Afternoon,

 

I'm a 22-year-old who is slowly finishing college, but work full time or did. I work at a ski resort where the fall is the only offseason, in which I don't have worked but work 40+hrs a week all other seasons. I was told by my boss I could either find a job for the fall time or collect unemployment which I never thought of. 

 

I was thinking like hmmm, that would be cool to get some income while I'm not working. But then thought, hmm is there a catch to that or is it like there for the taking. 

 

I was curious if I did apply for unemployment and got accepted(not sure how this process really works yet) would this affect the taxes I would receive in March/April? I know I file on my own without my mom and whatnot, but am not super fluent in tax returns and personal finance, as unfortunate as that is.

Message 1 of 6
5 REPLIES 5
Jnbmom
Credit Mentor

Re: Unemployment affect tax returns?

If you file for unemployment you have the option of getting taxes withheld from your check, I highly suggest to do that or you will end up having to pay the taxes  on the income come tax time.

EXP 780 EQ 791TU 795
Message 2 of 6
pipeguy
Senior Contributor

Re: Unemployment affect tax returns?

Welcome to MyFico:

 

Unemployment income is taxable income and a condition of getting approved (ongoing payments) is that you are actively seeking employment while receiving benefits. That said, based on your gross income you may have no federal tax obligation - for 2017 that number was under $10,400, but for 2018 it should be higher due to an increased standard deduction of $12,000 for single taxpayers.

 

Unemployment payments are based on your previous job (time employed and the amount you earned), which I suspect was not that high due to being seasonal. The amount will vary based on the state you worked in (you apply for benefits in the state you worked in) but most cap out around $125 a week for up to 26 weeks - again this depends on the state as many expanded the number of weeks during the last recession. 

 

State unemployment information is online for every state - you might check that out.

 

Add: As noted in my follow up post, the $125 is my best guess estimate and could be higher or lower. I should also offer that although widely ignored in some locations and states, collecting unemployment requires you to be actively seeking employment and being a full-time student will not count as seeking employment unless its specific job training (you could argue that case that college is a means for employment, but I doubt that'll work). 

Message 3 of 6
K-in-Boston
Credit Mentor

Re: Unemployment affect tax returns?

Ouch! $125 a week is the standard maximum? I think it’s around $800 here in Mass, which still wouldn’t go very far. I briefly collected unemployment when I first got out of the Army a few decades ago while searching for a civilian job. The state I lived in at the time did not have the option to withhold taxes, so it was a rude awakening when I filed my taxes. As others have stated, if you do go that route you’ll likely want to opt for that.
Message 4 of 6
pipeguy
Senior Contributor

Re: Unemployment affect tax returns?

Mass is a very generous state  https://www.mass.gov/service-details/how-your-unemployment-benefits-are-determined

 

More than double Virginia or North Carolina ($300 to $350), but that or any maximum is determined by your previously earned income. 

 

2016 stats: The national average in 2016 was $332.

 

My figure was based on seasonal work which I assumed was NOT a high paying position, but you are right, it may be over $125/week.  

 

ADD: Unemployment insurance was widely abused and expanded during the last recession and has slowly been cut back over the past several years. At one point you could get benefits for 208 weeks (2 years) and this was expensive for States. Unemployment Insurance is paid through premiums by employers and these premiums were increased several times to cover the shortfall in the program caused by the expanded benefits. Also, understand that unemployment payments are managed by the States and backed by the USGov which is required to cover shortfalls with automatic "interest-bearing loans" to States.

 

I know all this information is outside the scope of the OP's original question, but I'm trying to shed some light on why benefits are taxed. In my line of work, unemployment benefits were a big deal during the recession - cost/expansion/state obligations and program abuse.  

Message 5 of 6
Anonymous
Not applicable

Re: Unemployment affect tax returns?

It may be easier to just get another part time job in theoff season, such as Uber/Lyft or whatver. IMO $125 a week is peanuts considering the cost of living thse days, and the fact you have to be actively seeking employment. < work in itself depending on where you live. 

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