Local News

Unemployed owe income taxes

Posted January 21, 2010 3:52 p.m. EST
Updated January 21, 2010 8:29 p.m. EST

— 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.

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.