News & Tech Tips

Ohio Income Tax Update: Unemployment Benefits

Kathleen Hargrove on April 8, 2021

Last month, Sub. S.B. 18 was signed into law. This incorporates recent federal tax changes into Ohio law effective immediately.

 

Specifically, federal tax changes related to unemployment benefits in the federal American Rescue Plan Act (ARPA) of 2021 will impact some individuals who have already filed or will soon be filing their 2020 Ohio IT 1040 and SD 100 returns (due by May 17, 2021).

 

Ohio taxes unemployment benefits to the extent they are included in federal adjusted gross income (AGI). Due to the ARPA, the IRS is allowing certain taxpayers to deduct up to $10,200 in unemployment benefits. Certain married taxpayers who both received unemployment benefits can each deduct up to $10,200. This deduction is factored into the calculation of a taxpayer’s federal AGI, which is the starting point for Ohio’s income tax computation.

 

Many taxpayers filed their 2020 federal and Ohio income tax returns and reported their unemployment benefits prior to the enactment of this deduction.

 

As such, ODT offers the following guidance related to the unemployment benefits deduction for tax year 2020:

 

  • Taxpayers who previously filed federal and Ohio tax returns and are waiting for IRS to issue a refund based on the unemployment benefits deduction.

 

  • All other taxpayers who previously filed their federal and Ohio returns prior to the enactment of this federal deduction and are waiting for the IRS to issue a refund based on the unemployment benefits deduction do not need to take any additional action on their originally filed Ohio IT 1040 return (and/or SD 100) at this time. The Department will provide further guidance when more details are available from the IRS, please continue to monitor our website.

 

  • Taxpayers who previously filed federal and Ohio tax returns without the unemployment benefits deduction, but who are not entitled to any additional Ohio refund.

 

  • Taxpayers who previously filed their federal and Ohio returns prior to the enactment of this federal deduction and whose Ohio income tax liability amount (IT 1040, line 10) was $0, do not need to take any additional action. Such taxpayers are not entitled to any additional Ohio refund.

 

  • Taxpayers who are amending their federal return to claim the unemployment benefits deduction.

 

  • Taxpayers who file an amended federal return should wait to file their amended Ohio IT 1040 (and an amended SD 100 if applicable) until the IRS has approved the requested changes.

 

  • Please note that the IRS does not recommend filing an amended return for the adjustment at this time.

 

The IRS’s current guidance on the federal taxation of unemployment benefits can be found here and how they will recalculate taxes on unemployment benefits can be found here.

 

If you have additional questions or need assistance, please work with your Whalen Advisor.

 

 

SOURCE: Ohio Department of Taxation

Ohio Urging Victims of Unemployment Fraud to Act Now to Avoid Tax Troubles

Kathleen Hargrove on February 10, 2021

The Department of Taxation (ODT) is warning Ohioans who may be victims of unemployment fraud to report the suspected fraud or potentially face higher taxes.

 

The Ohio Department of Job and Family Services (ODJFS) has identified more than 80,000 cases of unemployment fraud by criminals using stolen identities.

 

Victims of that identity theft who have received Form 1099-G from ODJFS showing that they received unemployment benefits – but never applied for benefits – could potentially pay federal and state tax on that un-received benefit if they don’t act to correct the record.

 

Unemployment benefits are taxable and the IRS is notified when someone receives benefits. Victims of unemployment fraud who’ve received an unwarranted 1099-G are being advised to contact ODJFS, report the fraud, and ask for a corrected 1099-G.

 

ODJFS will then contact the IRS and correct the record so the victim of fraud will not incur a tax liability.

 

The Internal Revenue Service (IRS) has issued guidance to taxpayers regarding identity theft and ODT is advising fraud victims that they do not need to have a determination from ODJFS on their ID theft claim or a corrected 1099-G to file your federal and state income tax returns.

 

Taxation officials say fraud victims generally don’t need to report the un-received unemployment benefit on their tax return but need to pursue a corrected 1099-G from ODJFS after returns are filed to avoid a future tax bill from the IRS or ODT.

 

For additional information or guidance, please contact:

 

ODJFS at (833) 658-0394 or: https://unemploymenthelp.ohio.gov/, and click on the red ‘Report Identity Theft’ button

 

The IRS at: https://www.irs.gov/newsroom/irs-offers-guidance-to-taxpayers-on-identity-theft-involving-unemployment-benefits

 

ODT at: https://tax.ohio.gov/wps/portal/gov/tax/help-center/resources/1099g

 

 

 

SOURCE: Ohio Department of Taxation

Tax implications of working from home and collecting unemployment

Kathleen Hargrove on September 15, 2020

COVID-19 has changed our lives in many ways, and some of the changes have tax implications. Here is basic information about two common situations.

 

Working from home:

Many employees have been told not to come into their workplaces due to the pandemic. If you’re an employee who “telecommutes” — that is, you work at home, and communicate with your employer mainly by telephone, videoconferencing, email, etc. — you should know about the strict rules that govern whether you can deduct your home office expenses.

Unfortunately, employee home office expenses aren’t currently deductible, even if your employer requires you to work from home. Employee business expense deductions (including the expenses an employee incurs to maintain a home office) are miscellaneous itemized deductions and are disallowed from 2018 through 2025 under the Tax Cuts and Jobs Act.

However, if you’re self-employed and work out of an office in your home, you can be eligible to claim home office deductions for your related expenses if you satisfy the strict rules.

 

Collecting unemployment:

Millions of Americans have lost their jobs due to COVID-19 and are collecting unemployment benefits. Some of these people don’t know that these benefits are taxable and must be reported on their federal income tax returns for the tax year they were received. Taxable benefits include the special unemployment compensation authorized under the Coronavirus Aid, Relief and Economic Security (CARES) Act.

In order to avoid a surprise tax bill when filing a 2020 income tax return next year, unemployment recipients can have taxes withheld from their benefits now. Under federal law, recipients can opt to have 10% withheld from their benefits to cover part or all their tax liability. To do this, complete Form W4-V, Voluntary Withholding Request, and give it to the agency paying benefits. (Don’t send it to the IRS.)

 

We can help

We can assist you with advice about whether you qualify for home office deductions, and how much of these expenses you can deduct. We can also answer any questions you have about the taxation of unemployment benefits as well as any other tax issues that you encounter as a result of COVID-19.

Whalen CPAs
250 W. Old Wilson Bridge Rd., Suite 300
Worthington, OH 43085-2215
(614) 396-4200

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