New Jersey unemployment, tax changes: what you need to know
Tax season can still be stressful, but the COVID-19 pandemic has brought more complications. Thanks to stimulus packages, clawback benefits, and business loans, many New Jersey residents received income they never claimed in previous tax years. Taxpayers may not know how to report aid when filing their income tax return or what tax relief the government has already implemented.
Here are some frequently asked questions about when to file, how to manage unemployment benefits and business loans, and other changes for the 2020 tax season:
Federal and New Jersey tax filing deadlines have been extended
Both New Jersey and the Internal Revenue Service have extended the deadlines for filing state and federal income tax returns from April 15, 2021 to May 17, 2021.
This extension applies to individual taxpayers, including those who pay the self-employment tax. Taxpayers do not have to fill out a form to use this extension.
But New Jersey’s estimated individual tax payments for the first quarter of 2021 are still due on April 15, according to the state’s Treasury Department.
What if I earned more than $ 10,200 unemployed?
New Jersey does not tax unemployment insurance payments, but they are subject to federal income tax.
however, as part of the federal stimulus bill called the American Rescue Plan, some New Jersey workers are not required to pay taxes on up to $ 10,200 in unemployment benefits received last year. You and your spouse can each claim this amount, which means a couple could claim up to $ 20,400 in tax-exempt unemployment benefits if they received that much.
The tax benefit applies to people with incomes below $ 150,000, and applies to benefits through new federal unemployment programs created under the various stimulus programs, and to traditional unemployment benefits through the state unemployment fund.
But the tax exemption only allows each individual to claim up to $ 10,200. So if one spouse received $ 15,000 in unemployment benefits and the other $ 5,000, the exclusion would be $ 15,200, not $ 18,000.
For advice from the IRS on how to claim the tax benefit, visit https://www.irs.gov/forms-pubs/new-exclusion-of-up-to-10200-of-unemployment-compensation.
Do I have to file an amended return due to the change in unemployment tax?
“The IRS strongly urges taxpayers not to file amended returns related to the new legislation or take other unnecessary action at this time,” the IRS wrote in a declaration of 12 March.
For families who have already filed taxes but have not claimed the tax benefit, the IRS may be able to adjust the returns and will issue a second refund, said IRS Commissioner Charles Rettig.
“We think we will be able to monitor and we can announce that individuals will not have to file amended returns to qualify for the $ 10,200 per person exclusion,” Rettig told lawmakers. “We believe we will be able to automatically issue refunds associated with the $ 10,200.”
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What about Form 1099-G?
Form 1099-G is a tax form that shows how much someone has received in unemployment benefits.
The New Jersey Department of Labor said if it had your email address on file you should have received your 2020 form. 1099-G. If you haven’t received it, you can also use the state’s “claims tool” at https://lwdwebpt.dol.state.nj.us/ClaimStatus/claimStatus.htm, and use the “Self-Service Options” to view 1099-G information or request another copy by email.
If you received a Form 1099-G but did not declare unemployment, you could be a victim of tax evasion. Report suspected fraud by calling the Department of Labor’s fraud hotline at 609-777-4304 or online at https://bit.ly/3m4npju.
What if I didn’t receive my stimulus checks from last year?
If you were eligible for the first and second rounds of economic impact payments but still have not received them or have not received all of the amounts, you may be able to apply for a credit in place of the checks. stimulus on your taxes under the 2020 recovery rebate credit.
To find out how to apply for the credit, visit the IRS instructions page at https://www.irs.gov/newsroom/recovery-rebate-credit-topic-c-claiming-the-credit.
Even if you don’t earn enough money to file taxes normally, you will need to file a 2020 income tax return. receive the credit. If you earn less than $ 72,000, you can file your federal taxes for free using “Free file. “Low-income people, seniors, people with disabilities and those with limited English proficiency can benefit from free tax advice from a voluntary tax assistance group. Find an organization near you at https://irs.treasury.gov/freetaxprep/.
Can creditors seize my last stimulus check?
Under an executive order signed by Governor Phil Murphy, 50 banks and credit unions have agreed not to seize stimulus checks under the American Rescue Plan for past debts or overdraft accounts. The list includes Banks of America, Citibank, PNC Bank, TD Bank, and Wells Fargo. For a complete list of participating financial institutions, visit https://www.state.nj.us/dobi/covid/stimulus/fininstitutions.html.
Taxpayers should contact their financial institution to participate. There are exceptions to protection, including child and spousal support and criminal restitution to victims.
Do I Pay Tax on Business Assistance Loans?
Paycheck Protection Program loans are exempt from federal and state taxes, and small businesses can deduct business expenses that were paid with the proceeds of the tax-exempt loan for both tax-exempt purposes. federal and state tax, under the Federal Credit Act that re-authorized the PPP program and a February announcement. by Murphy.
“This move is designed to help already under siege small businesses, which are the majority of recipients of these loans,” Murphy said. “It’s no secret that New Jersey has been one of the hardest hit states by COVID-19 and that our small businesses have paid the price. PPP loans have helped many people stay afloat and this decision will give them an added advantage to help them weather this storm. “
Are there any other tax changes I should be aware of?
For the 2020 tax year, an additional 60,000 New Jersey taxpayers are eligible for the New Jersey earned income tax credit because the state lowered the age of eligibility from 25 to 21.
The federal government and New Jersey each offer this tax credit to low- and middle-income households, which can help you lower the amount of taxes you owe or increase your refund check. To see if you qualify for the federal earned income credit, visit https://www.irs.gov/publications/p596.
New Jersey estimates that 25% of eligible New Jersey taxpayers never claim the New Jersey Earned Income Tax Credit. In 2020, New Jersey residents will benefit from 40% of the federal tax credit, an average savings of $ 882, depending on the state.
In practice, if your federal tax credit was $ 4,000, your state tax credit would be $ 1,600.
To learn more about the New Jersey Earned Income Tax Credit, call 609-943-1040 or visit https://www.state.nj.us/treasury/taxation/eitc/eitcinfo.shtml.
Ashley Balcerzak is a reporter at the New Jersey Statehouse. For unlimited access to his work spanning the New Jersey legislature and political power structure, please subscribe or activate your digital account today.
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