In the craziness that is 2020, Pandemic Unemployment Assistance has helped many people survive when their places of employment had to shut down. Employees often do not think about the fact that unemployment payments are taxable income.
The South Carolina Department of Revenue recently wrote a reminder to help tax payers plan ahead for taxes. You may request that taxes are withheld from your unemployment payments, you may pay on a quarterly cycle, or pay the entire bill due at tax time next year.
Each of these methods has its own advantages and disadvantages. Withholding taxes from your unemployment can cause a reduction in weekly cash flow that you cannot afford while looking for new work. Quarterly taxes will give you regular cash flow and avoid a large lump sum at the end of the year. But, they can result in different payments if you are tracking expenses and tax deductions on the year or if you plan to offset your tax bill with tax credits at the end of the year. Finally, you can pay your entire tax bill during next year’s tax season. With good tax help, this will result in the most accurate tax cost but will also mean that you can be liable for a large lump sum payment when you file your taxes.
No matter your chosen method of managing your taxes, you need to talk to a professional about your tax bill from this year. It is going to be different than any year previously. We are available Mon-Wed, call ahead to arrange a covid-safe appointment with our staff during office hours.