How Being Laid Off, Furloughed, or Fired Will Affect Your Taxes
glamour.comquite as straightforward as “make less money, pay less in taxes.” If you went on federal or state unemployment at all in 2021, the same money that helped you get through difficult times may now come back to haunt you (in the form of , which should have arrived by January 31). “During the pandemic, people have been making more money on unemployment than ever before,” says , CPA and founder of ComplYant. “But here’s the kicker—those payments are taxable.
Unless you elected to have tax taken out of your unemployment checks before receiving them, odds are you still owe tax on the money you received last year.” Same goes for government stimulus checks, furlough pay, or severance pay or packages from a company that let you go—including payment for any unused vacation or sick days (all of this information will appear on the W-2 sent to the IRS by the employer). “You have to report that as income when you file your tax return.
The only reason you wouldn’t is if your total yearly income is below the filing threshold,” says , CPA and founder of the Alajian Group in Los Angeles.
For 2021, that’s if your income exceeded $12,550 as a single filer or $25,100 as a joint filer. Also worth noting: If you received advance payments on the Child Tax Credit mentioned previously and did not have withheld, you’ll now have to settle up with the IRS on that income, too. (Boo.)As you gather all your tax documents, you should also keep in mind that even if a company you worked in 2021 for went out of business, they can’t disappear until you’re all squared away for tax time (and unfortunately, the taxes you owe on that income aren’t going to disappear either). “If a company you used to work for closed down during the pandemic, they are still.
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