馃攳
How to Avoid a Huge Tax Bill & Penalties with Unemployment Benefits | 3 Things NO ONE is Telling You - YouTube
Channel: Dr. Nitin Chhoda - Ignition Time
[0]
Hi everyone, this is Dr. Nitin Chhoda!
In this training video I'm going to
[3]
teach you "How to avoid a huge tax bill.
How to avoid interest. How to avoid
[7]
penalties with your unemployment benefits.
I'm going to cover three things in this
[11]
training video. The first is that your
unemployment benefits including the $600
[16]
week federal booster (which at the time
I'm recording this video training is
[19]
going to be available until the 31st of
July) it's actually considered ordinary
[23]
income. Number 2, I'll talk about what
is ordinary income and number 3, I'll
[29]
give you three ways to offset a huge tax
bill with penalties and interest
[34]
associated with this unemployment income.
Now before I get started let me say I
[38]
understand the situation that all of my
subscribers are going through out there
[42]
if you're receiving unemployment right
now and if you don't have a job whether
[46]
you pay taxes or not next year what is
ordinary income what is state tax income
[50]
what you need to pay that may not be at
the top of your priority list right now
[55]
in fact you might just be saying you
know what I don't really care about
[58]
withholding and all of the other things
because right now my goal is to put food
[62]
on the table my goal is to pay rent my
goal is to make sure my lights don't go
[66]
on
I get that I recognize that I empathize
[68]
with that but a lot of subscribers have
asked for this training video and also
[73]
I'm trying to help all of us not only
survive the present but also plan for
[77]
the future now for my subscribers who
are unemployed or who lost their job and
[81]
who are now waiting for an employment
you need to be aware that your
[85]
unemployment income including the $600
federal booster is considered ordinary
[90]
income even if you see a significant
drop in your total income because your
[95]
wages your salary is gone you could see
a tax bill next year because your
[100]
unemployment benefits are considered
ordinary income now the fact is a lot of
[105]
individuals on unemployment don't even
know or don't even realize that the
[109]
income is considered as ordinary income
which is why I wanted to create the
[113]
create this training video and give you
some clarity about this situation now
[117]
what is ordinary income ordinary income
refers to many different types of income
[121]
that is taxed at the regular US tax
brackets this includes wages salaries
[126]
tips and commissions now this does
include long term capital gains and
[130]
qualifying dividends both of
which have a more favorable tax
[134]
treatment now your unemployment benefits
are taxed by the federal government as
[140]
ordinary income now as all of you
probably know when you get your paycheck
[145]
you're paying federal income tax you're
paying state income tax you're paying
[148]
Social Security and Medicare tax when
you get unemployment benefits the
[153]
federal government will get their taxes
back when you file your taxes in the
[158]
following year so once again the
unemployment benefits including the $600
[162]
federal booster are subject to federal
income tax now the good news is they are
[167]
not subject to Social Security and
Medicare tax and when it comes to state
[172]
income tax it really depends on your
state so again your unemployment
[176]
benefits are considered taxable income
by the federal government just like
[181]
wages and state taxes may or may not be
applicable I've done another video
[186]
training where I talked about state
income taxes so definitely check that
[189]
out on my channel where I talk about the
differences between different states
[193]
where as far as state income taxes are
concerned a lot of states have a
[197]
shortfall in their own budget and
they're charging state income taxes for
[201]
example California and New York are
charging state income taxes even for
[205]
remote workers
in other words workers who don't live
[208]
there but who are passing through to
work let's say they had to move to a
[212]
different location or stay with a
relative during the pandemic on the
[215]
other hand states like Texas and Florida
have no state income tax to begin with
[220]
so a portion of the unemployment
benefits that you're getting now will
[223]
essentially find its way back to the
federal government when you file your
[228]
taxes next year that's just that's just
the way things are so the way this works
[232]
is let me give you a scenario and
highlight the differences between the
[235]
two scenarios so it's a little bit
easier to understand let's say you were
[239]
living in a normal world in a normal
situation you were working on-site you
[242]
were working from your place of work you
were working from your office and in
[246]
that situation let's say you made thirty
thousand dollars a year you would pay
[249]
federal income tax you would pay state
income tax you would pay Social Security
[254]
and you would pay Medicare taxes but now
in this in with the unemployment benefit
[259]
situation let's say you get the same 30
thousand dollars a year let's just
[263]
assume that for the sake of argument so
we can compare
[266]
with the same numbers in that case you
would pay federal income tax on the
[270]
thirty thousand dollars you'd be
required to pay that tax when you file
[273]
your tax returns next year you will not
pay Social Security and Medicare taxes
[278]
but you may be required to pay state
income taxes it really depends on your
[282]
state because every state has different
guidelines depending on whether you live
[287]
in the state or whether you work in the
state depending on whether that state is
[290]
your state of domicile in other words
where you live your primary residence or
[294]
if it's your state of work in other
words you relocated for whatever reason
[298]
to work in that state now here's the
problem with this situation that I want
[302]
all my subscribers to understand let's
say you're getting thirty thousand
[306]
dollars in unemployment benefits this
year and there's no withholding in other
[310]
words you get all the money and you
don't pay any federal income tax the
[314]
problem is if you don't pay a sufficient
amount of federal income tax then by the
[318]
time you get to the next tax filing
deadline which is presumably April 15
[322]
2021 and now you owe back taxes for 2020
and remember you unemployment benefits
[328]
will be subject to federal income taxes
if you haven't paid enough taxes you
[332]
could not only have a huge tax bill come
April 15 2021 but you could also be
[337]
subjected to penalties and interest on
the unpaid amount now I'll give you
[342]
three options to avoid a huge tax bill
when it comes to your unemployment
[347]
benefits the first is to have taxes
withheld now when you're filing for
[352]
unemployment benefits from your state
agency and again every state has its own
[356]
specific rules ask to have 10% of your
unemployment benefits withheld for
[362]
federal income taxes now this will cover
federal income taxes and if you have the
[366]
ability to do so at the outset when you
apply for state unemployment benefits
[370]
that's something you should consider
doing now if you're already receiving
[373]
benefits and you want to make an
adjustment you will fill out the IRS
[377]
Form w-4 V which is a voluntary
withholding request and what this will
[383]
do is this will adjust your withholding
you may also make changes to this every
[387]
two weeks as and when you want to adjust
your withholding so let's say your
[391]
recertifying your unemployment claim
every two weeks now remember you have to
[395]
follow the exact guidelines the exact
protocol from your state
[399]
unemployment agency so make sure you
look to them for guidance I'll include a
[403]
link in the description below that
allows you to get in touch with your
[406]
state unemployment agency and ask them
for specific advice reach out to the
[411]
correct person so that you can adjust
your whittling as needed so that you
[416]
don't have a huge backlog of federal
income taxes and you don't have a huge
[420]
taxable when you file your income taxes
next year the best website for this is
[425]
the career one-stop website from the US
Department of Labor that can now link
[429]
you to all of the individual state and
employment agencies and I'm sure a lot
[434]
of my subscribers know this already the
second option if you want to avoid a
[438]
huge tax bill at this time next year is
to file quarterly taxes now this is more
[443]
applicable to individuals who are
self-employed so if you are a wage
[447]
earner if you are on a salary this may
not be applicable to you but if you are
[450]
self-employed you have the option to pay
quarterly taxes now and you should pay
[455]
some amount of quarterly taxes so you
avoid a huge tax bill you avoid interest
[460]
you avoid penalties come tax time next
year now the third way to offset a huge
[465]
tax bill potentially penalties and
interest next year when you're filing
[468]
your 2020 tax returns on or before April
15 2021 is to try and save 10% of your
[475]
unemployment benefits towards federal
taxes put that money in a savings
[479]
account hold on to that money because
cash is so important right now we live
[484]
in a climate where a lot of us are
struggling when a lot of us find it hard
[488]
to pay for it to pay rent to pay for
food to pay our utilities so cash is
[493]
very important right now this would be
my preferred option
[496]
you save you set aside money because
when the tax bill comes due next year
[501]
and it will come to you next year
there's no way to avoid these taxes you
[505]
have to pay the taxes so when the tax
bill comes you next year you should have
[509]
some money set aside now the reason I
prefer this option is it gives you a
[513]
little bit more flexibility it gives you
a bit more of a cushion a buffer if you
[518]
will because you'd rather have the money
in a savings account and then use it for
[522]
something that's necessary as opposed to
not have it when it comes time to pay
[527]
taxes because then again like I
mentioned you could be subjected to do
[532]
interest
could be subjected to penalties and you
[534]
want to avoid that under any
circumstances I know this is a tough
[539]
time for all of us and I know that a lot
of us really count on these unemployment
[543]
benefits and need them to be able to pay
our bills and a lot of us are in a very
[547]
dire situation I'm trying to prepare you
for what lies ahead and even though like
[552]
I mentioned at the start of this
training video even though the
[555]
withholding and even though the setting
aside money for taxes may not be a high
[558]
priority right now even though the
higher priority is to keep the lights on
[562]
the higher priority is to buy food I
completely understand that I'm just
[567]
trying to give you information so that
you can be prepared for the future as
[570]
well because one day we will get through
this and one day all of this will be
[575]
behind us I'm with you I support you all
and I appreciate you for watching this
[580]
video if you are an existing subscriber
thank you so much if you're not a
[584]
subscriber yet please consider
subscribing
[586]
I'll give you important updates that
will help you get through this situation
[590]
so that you know your options you know
what lies ahead and you're financially
[594]
prepared for a better future thank you
so much for watching please click the
[598]
like button because it really helped so
the YouTube algorithm I'm with you and
[601]
I'll see you in the next training video
thank you
Most Recent Videos:
You can go back to the homepage right here: Homepage