WASHINGTON, DC — U.S. Josh Gottheimer urged House leaders to include tax relief legislation within the new COVID-19 relief package to provide tax relief for up to $10,200 in unemployment payments on a 2020 tax filing.
The letter, which was signed by 12 sponsors of the bicameral Coronavirus Unemployment Benefits Tax Relief Act, points out a recent survey which showed that almost 40% of Americans were not aware that unemployment benefits would be taxed — potentially leaving millions with a surprise tax bill this year.
New Jersey does not levy state-level taxes on unemployment benefits. This federal measure would align the federal tax code to cut taxes for thousands of North Jersey residents who are temporarily unemployed on the first $10,200 of unemployment benefits — helping residents pay their bills and protect their families during this pandemic.
“Without tax relief for these benefits…millions of workers who claimed UI last year may face an unexpected tax bill this spring,” the Members wrote. “Workers and families are still struggling with the economic pain caused by COVID-19, and we are pleased the American Rescue Plan extends unemployment benefits for workers and financial support for small businesses. However, impending tax bills on UI benefits take away vital dollars that individuals need to pay for essential expenses like housing, health care, and food.”
The letter also highlights Treasury Department data showing that federal unemployment benefits added by the CARES Act last year frequently went untaxed, despite these benefits being subject to federal income tax. Those receiving these benefits without having tax withheld will often see a major tax bill this Spring.
“Despite the Treasury Department reporting paying out $580 billion in UI benefits last year, only $22 billion was transferred to the IRS by December from state unemployment systems for withholding purposes,” the Members wrote. “Reporting from outlets nationwide has chronicled stories of workers who claimed UI benefits last year now facing surprise tax bills of over $1,000.”
The Coronavirus Unemployment Benefits Tax Relief Act was also introduced in the Senate by Senator Dick Durbin of Illinois. The tax relief provided in the bill would extend to both workers who received benefits through federal unemployment programs like Pandemic Unemployment Assistance (PUA) and Pandemic Emergency Unemployment Compensation (PEUC) as well as those who received traditional benefits through their state unemployment insurance fund.
The letter was sent to House Budget Committee Chairman John Yarmuth, House Rules Committee Chairman Jim McGovern, House Majority Leader Steny Hoyer, and Speaker of the House Nancy Pelosi.
The letter was signed by the following 12 Members: Reps. Cindy Axne, Peter DeFazio, Josh Gottheimer, Eleanor Holmes Norton, Andy Levin, Susie Lee, Chris Pappas, Jamie Raskin, Donald Payne, Jr., Scott Peters, Mark Takano, and Susan Wild.