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Unemployed owe income taxes

Posted January 21, 2010

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— North Carolinians who collected unemployment benefits in 2009 could face an unexpected surprise in April 2010: income taxes.

The federal Internal Revenue Service and state Department of Revenue consider unemployment benefits to be income and tax them accordingly. In 2009, however, a special provision allowed the first $2,400 not to be taxed.

When someone files for unemployment, they can fill out a form that allows them to sign up for direct deposits and gives them the option to have their taxes withheld from those checks.  Those who ignore the form automatically receive unemployment benefits on a debit card, without taxes taken out.

Unemployed owe income taxes Unemployed owe income taxes

Revenue officials recommended having both state and federal taxes withheld.

Tywonna Staggers said she first chose not to have her taxes withheld but changed her mind after receiving several unemployment checks.

"It hurts you at the end of the year when you owe," Staggers said.

Others said they couldn't afford not to get as much money as possible.

"My benefits are not very much at all. It's hard to live on what I get paid at all," Doug Walker said. "I guess I'm rolling the dice, but I'll pay my taxes at the end of the year."

Stephanie Smith said she had her taxes withheld because she feared that she would have nothing left to pay her taxes in April. When she filed for unemployment, though, she also feared day-to-day financial difficulties.


This story is closed for comments.

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  • sw Jan 25, 2010

    Thankfully I've never had to collect unemployment, but if I did, could I deduct all of the taxes I paid into unemployment? We pay for the privilege of receiving unemployment, don't we? And I don't remember that being optional. Maybe being taxed against any refund money might be "fair", but once that money is gone, it should stop there. We're taxed when we earn it, then taxed again when we spend it. Freedom aint free but come on.

  • ugottabkiddinme Jan 22, 2010

    paying tax on uneplymnt is stupid...why dont they just automatically hold out the taxes like they do if you were employed so that your not crushed in april....i know unemploymnt doesnt pay much, and to top it off you cant work a part time job to supplement which is crazy.your penalized if ya try to help yourself while you are down

  • oldernbudwizer Jan 22, 2010

    This is totally asinine. And the kicker is the fact that you do not qualify for Earned Income Credit with unemployment. If you are drawing unemployment, that means you are unemployed through no fault of your own, so the income should be considered earned.

  • pappy1 Jan 22, 2010

    Paying taxes is only optional if one happens to hold public office. :^)

  • EasyGoer Jan 22, 2010

    I thought paying taxes was optional?

  • tpbwetland Jan 22, 2010

    Recinding taxes that the unemployed have to pay?!? Sorry, man, the system is unfortunatley set up so that those down and out get kicked in the pants while the fat man executives in the multi-national corporations get the tax loopholes. And now these same fat cats can buy elections, too, in accordance with activist judges of the Supreme Court. So much for democracy in this country.

  • csampson Jan 22, 2010

    Being taxed when your unemployed is like getting kicked while your down. You are short of money to begin with, lets not make it worse. This tax should be recinded, any legislators listening?