September 9, 2020

Optima Tax Relief provides assistance to individuals struggling with unmanageable IRS tax burdens. To assess your tax situation and determine if you qualify for tax relief, contact us for a free consultation.

When the pandemic struck earlier this year, millions of Americans were either laid off or furloughed by their employers. If you are wondering what the difference is, employees that have been laid off are let go by their employer permanently and will most likely not be re-hired by the same company. If you have been furloughed by your employer, it means that you have been temporarily laid off with the intention that you will be returning back to work in the future when conditions change. For those who have been furloughed, they don’t have to go through the re-hiring process again and some employees may be eligible to continue their benefits such as health insurance throughout their furlough period.

If you were furloughed, you most likely applied for unemployment to financially assist you during the period of time that you were out of work. If you received unemployment benefits, it is important to understand whether or not this will need to be placed on your tax return. Taxpayers will also need to know if their unemployment income is considered taxable and how it will affect them once they return back to work and start receiving a paycheck again.

If you previously received refunds for past tax years that you have filed for, expect to possibly receive a smaller refund when you file for future taxes if you have also received additional income from working throughout the year. Your refund will be determined on how much taxes were taken out of your regular paycheck for income tax withholding. If you had more taxes taken out each period than the taxes owed, then you can expect to receive a refund once your tax return has been filed.

For those that received fewer paychecks this tax year because they were furloughed for part of the year, it can be expected that they will receive a smaller refund in comparison to previous tax years. If a taxpayer has been furloughed, they can also expect to have fewer paycheck withholdings which will result in a much lower refund amount.

Taxpayers who didn’t withhold any federal taxes from their unemployment may have not had enough withheld to convert their tax rate which could cause them to either: 1) owe a tax balance or 2) receive a much smaller refund in order to make up for the taxes that weren’t deducted from their income. While receiving unemployment compensation, taxpayers can request to have 10% withheld from their unemployment by filling out a W-4V form, also known as the Voluntary Withholding Request form.

If you need tax help, contact us for a free consultation.