HUNTSVILLE, Ala. — If you've been getting unemployment assistance during the pandemic, it's important to know that you'll have to report that money when tax season comes back around-- and it could affect your return.
We spoke with a credit educator today to keep you informed.
Milli Gunn, a Credit Educator with Credit 1 USA in Huntsville, tells our reporter, "This has been a great year for understanding forward thinking and the necessity to plan ahead.”
Tax Season is about eight months away. But, there are some things you should know and prepare for now-- especially if you’ve been receiving federal unemployment money during the pandemic.
You’ll have to pay federal taxes on that money in 2021.
And state tax varies-- depending on where you are. Alabama does not tax unemployment benefits. The same goes for Tennessee and Florida. Georgia and Mississippi, however, do.
Click HERE to find more information on your state's standing on taxing unemployment benefits.
Milli Gunn is not a tax specialist. But, she says, with all the financial hardship caused by the pandemic, more people might want to consult a professional when filling out their taxes next year. She adds, “You can’t go wrong getting help.”
And you don’t have to pay an arm and a leg to get that help. Gunn tells us, “Consult your local resources because they do offer lower and reduced savings. Because, a lot of the time, we do it ourselves to save some money. But, there may be an alternate that will still allow you to save money.”
Gunn says, calling 2-1-1 and inquiring about tax assistance is a great way to get connected with affordable tax professionals. She also adds that some states have programs that can provide you with tax assistance for free or reduced prices.
Paying taxes on unemployment money will impact your bottom line when it’s time to get your tax return. Milli Gunn tells us, “I think it’s a good idea to seek professionals for professional things. Because, what you don’t want to do is fill it out wrong and you wind up owing extra money or you lose out on some extra returns that you could have received.”
She says there are some things to think ahead about before spending your tax return next year.
Milli Gunn says you should consider asking yourself the following questions before making purchases with your tax return money:
- What is the balance on your credit card? What debts do you have outstanding?
- What does your savings account look like?
- Can you survive three to six months without employment?
- Can you survive three to six months with reduced employment?
- Is your household taken care of?
- Are your children's needs taken care of?
- Can you use that money for other necessities that may have become more expensive during the pandemic? Ex. groceries, household utilities, etc.