This year is an anomaly, and your taxes might also be. But be prepared and pay those needed estimates.
According to a June Bankrate.com survey, 49% of U.S. adults lamented, “their income has been hurt by the coronavirus pandemic and related shelter-in-place orders.” And as of August 8 of this year, the U.S. Department of Labor reports 27 million Americans were collecting unemployment benefits. You may be one of them.
But did you know that those unemployment benefits are federally taxable as income and possibly subject to state income tax as well? Fortunately, these benefits are not taxable by the Commonwealth of Pennsylvania nor by their local governments. Unfortunately, federal taxes may not have been withheld from those payments. The IRS rule is that you need to pay the lesser of 100% of last year’s tax liability (actually, 110% for filers making over $150,000 in adjusted gross income) or 90% of what you owe by the tax filing deadline in 2021. Not doing so can subject you to underpayment and late penalties.
Be forewarned and don’t get caught with a surprising tax bill next year.