Receiving unemployment payments? Tax season might cost you next year
HOUSTON, Texas (KTRK) -- Boosted unemployment benefits were a big help for families during the pandemic, but financial planners worry many could find themselves shocked come next tax season.
Some may not realize, but you have to pay taxes on unemployment benefits.
"I have no idea," Houstonian Delena Martinez said. "That would be hard. I really don't know. That would be hard for me."
When Texans sign up for benefits, there's an option for the state to withhold 10%.
"Tax withholding is completely voluntary," Texas Workforce Commission spokesperson Cisco Gamez said. "Withholding taxes is not required."
RELATED: Texas looking to collect $214 million in overpaid unemployment benefits
Experts fear many may not have understood that.
"I think it's going to be a shock to a lot of people," financial planning expert Edward M. Gardner explained.
He added that if you didn't have taxes removed out of your unemployment checks, you should ask your employer to withhold more taxes to make up the difference once you return to work.
He said you can also set aside money each week on your own. Even if you had taxes removed, Gardner said benefits, boosted by an extra $600 a week, could put you in a tax bracket you weren't in before.
"The standard for a state is 10%, but for a lot of people, that may not be enough," Gardner said.
If you still receive benefits, it's not too late to remove taxes. After you log into your online account, there's an option to change your withholding.
Texas Workforce Commission is also dealing with an increased number of fraudulent claims.
ABC13 obtained new numbers Tuesday. The state numbers show the number of fraud claims this year, which hasn't finished, have more than doubled since last year.
Through mid-September, the number of fraud claims is 4,582. Last year, it was 1,856.
TWC said it might seem like a large number, but it's only 0.2% of the total number of claims this year.
Even if you don't need benefits, the agency said you should still be concerned about the increased fraud claims.
"If this money is never recovered, where you would see it is increased taxes on businesses, because businesses pay the taxes that fund the unemployment system," Texas Workforce Commission deputy communications director James Bernsen explained.
To prevent fraud, TWC said it would never ask for credit card or full bank account numbers, and agents would never make you pay to receive benefits.
Also, check your mailbox. If you receive a TWC letter, it might signal you're the victim of fraud.
To report fraud or learn more about withholding taxes from unemployment benefits, check the Texas Workforce Commission's website.
