Uncle Sam Will Collect Billions on Unemployment Benefits

Millions of Americans may wind up owing Uncle Sam as much as $50 billion in taxes on unemployment benefits they got in 2020, CBS News reported.

As the IRS starts accepting and processing tax returns on Friday, the news outlet cited a report from Goldman Sachs that noted layoffs soared during the COVID-19 pandemic — and that could wipe out many taxpayers’ refunds and even dent the economy.

"These surprise tax bills would reduce tax refunds or possibly even require net tax payments for vulnerable households, which may force some to cut back on spending," analysts with the investment bank wrote in the report, CBS News reported.

Unemployment benefits are subject only to federal income tax paid at income-tax rates. People living in states without an income tax or in states that don't tax such benefits — including Alabama, California, Montana, New Jersey, Pennsylvania, and Virginia — don't need to worry, Robbin Caruso, a partner in the tax practice at Prager Metis, told CBS News.
For everyone else tax filing software is available, CNBC reported, including from TurboTax and H&R Block. Free tax software is available through Credit Karma Tax, the news outlet noted, while an affordable option is tax software from TaxSlayer.

The good news, CBS News reported, is that Americans don't have to pay federal taxes on any of the Economic Impact Payments the government has distributed as coronavirus relief.

Small business owners whose Payment Protection Program loans were forgiven are also exempt from income tax on the value of the forgiven loan, CBS News reported.

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