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Susan Tompor: What to do now to avoid a nasty tax surprise next year

Susan Tompor, Detroit Free Press on

Published in Home and Consumer News

When it comes to taxes, many people now are focused on trying to track their refund. Or they're looking forward to getting a monthly check beginning around July 15 for an advance of the Child Tax Credit.

But plenty of people should consider whether they're going to have enough money withheld this year to cover the taxes owed in 2022.

It may be a good time to check — and possibly adjust — your withholdings to make sure you're not having too little tax withheld. And you can't just ignore money that arrives from the Child Tax Credit, either.

Some situations could lead to a nasty surprise next year when you file your 2021 income tax return. Here's a look:

Are you collecting jobless benefits in 2021?

Right now, all jobless benefits are taxable on federal returns in 2021. Yet taxes are not withheld automatically from jobless benefits. So if you want to have taxes withheld, you need to address that.

 

"Many people are surprised to learn that unemployment is taxable and they didn't opt to withhold taxes," said Kathy Pickering, chief tax officer at H&R Block.

Next year could prove to be even more confusing, too, if you're expecting the tax rules on jobless benefits to be the same as they were on 2020 income tax returns.

A limited tax rule change, which went into law March 11, enabled single taxpayers to exclude up to $10,200 of unemployment benefits received in 2020 from taxable income on their federal returns — or as much as $20,400 for married couples filing jointly. (The maximum $20,400 exclusion on jobless benefits for 2020 for married filing jointly would only be available if both spouses had unemployment benefits of at least $10,200 each.)

But that tax break only applied to 2020. So, unless something changes in the months ahead, you're on the hook for treating all unemployment compensation received in 2021 as taxable income.

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