RICHMOND, Va. (WWBT) - A lot of viewers have asked us about those stimulus payments this year. The check from over the summer and the $600 that went out recently. The big question we get is ‘will we owe taxes on that money?’
The short answer is no. There is no tax burden on those stimulus checks. But experts say that’s not the case if you got an unemployment check this year.
Virginians do not owe state income taxes on those unemployment checks, however, there are Federal Income taxes that must be paid.
If you didn’t get that automatically taken out of each unemployment check when you applied, then you will likely owe.
Here’s how it works: If you got a $600 a week check, then you owe the government 10% of each unemployment check or about $60 per check.
So, how do you know how much you’ll owe? The Virginia Employment Commission will send you and the IRS a FORM 1099-G detailing the benefits you received - plus any federal tax withholdings elected.
Another question we see a lot: What if I owe taxes come April 15th? Cherry Dale, a financial coach with the Virginia Credit Union, says don’t wait to find out what you owe.
“Sometimes if we know we’re going to owe taxes at the end of the day, we wait until the last minute. However, waiting to the last minute to understanding what you completely owe can be devastating to you financially because you could end up with a major tax bill in April. So, my advice would be to at least figure out how much you’re going to owe come April 15 and make sure that you have money set aside in order to pay those taxes. Or if you can not, or you don’t have that cushion, figure out where that money is going to come from,” said Dale.
You can also prepare to ask for an extension.
Another question we received: What if you don’t owe money? What if you figure out you are going to get a tax refund once you file? What should be priority number one?
Dale says there should be two big priorities for that money - paying off debt or adding to your savings.
“Often we almost get caught in this almost deer in a headlight moment when we get some extra money, and we don’t know what to do with it. It just sits in our account. Well, you really want to think about planning with that money. And when you think about paying off debt or saving, you really should be doing both. It really depends on how much savings you already have. If you do not have any type of savings put aside, then start your emergency savings fund. This would be outside of a retirement fund. That would really be your first priority,” said Dale.
She says to look at that tax refund in percentages. Take 50% to pay off debt and 50% to put in savings.
If you have no plan, this is a great place to start. Remember, if you’re an early bird when it comes to filing your tax return, you’ll have to wait for a little longer this year before the IRS will accept your return. That’s not happening until Feb. 12 this year.
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