If your clients are receiving unemployment benefits, consider sending a message to them now so they will avoid a tax bill later. The following is an example of language you can use:
Unemployment Benefits are Taxable Benefits
If you are receiving unemployment benefits, consider having tax withheld from these payments to avoid owing taxes when you file your federal and New York State income tax return next year. New York State unemployment insurance benefits and any of the special unemployment compensation authorized under the Coronavirus Relief Act are considered taxable income. By law, the New York State Department of Labor must report these benefits to the IRS and to the New York State Tax Department.
We encourage you to review your records and, if necessary, adjust your tax withholdings. You can change your tax withholding option on the DOL website. Doing this could help you avoid a tax bill next year. To start or stop the withholding of federal or state taxes from your weekly benefits:
- Login to labor.ny.gov/signin with your NY.gov ID
- Click “Unemployment Benefits”
- Click “Payment and Tax Withholding Options”
- Click “Tax Withholding” and follow the instructions