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Community Legal Aid warns of COVID-19 tax issues

Unemployment compensation is taxed by the federal government as well as Ohio.
Taxes 01212020
(Getty Images)

YOUNGSTOWN — Community Legal Aid advises that navigating the world of taxes is more complex this year for low-income Ohioans. 

“There are a number of new things to consider when filing your tax returns this year,” Legal Aid attorney Dana Goldstein said in a news release.

Goldstein said COVID-19 relief packages have tax implications.

“You can be fined for filing an inaccurate tax return,” she said. “A certified preparer knows what to look for and can make sure you get the maximum refund you are entitled to receive.”

Legal Aid encourages low- to moderate-income Ohioans to use Volunteer Income Tax Assistance programs. These services provide free tax preparation by certified preparers. Ohioans can find a VITA site in their area here or by calling 211.

An Ohioan who did not receive the full amount of the CARES Act stimulus money, or economic impact payment, can claim the recovery rebate credit when filing their tax returns. 

Goldstein said filers may choose to claim the credit if they believe someone else, such as a former spouse, received impact payments that should have been sent to them instead.

Close to 2 million Ohioans have filed claims for unemployment assistance since the start of the pandemic. Any benefits received through unemployment are taxable. This includes supplemental payments, such as the extra $600 payments provided through July under the CARES Act.

“If you did not have taxes taken out of those benefits, or if the amount taken for taxes was too low, you may end up owing taxes,”  Goldstein said.

Many Ohioans received notice that they were overpaid in unemployment benefits and may need to repay those benefits.

“The problem here is two-fold,” Goldstein said. “The IRS still considers this taxable income, so you will owe taxes on any portion not repaid. But you may also qualify for tax credits as those benefits are repaid.”

Advocates also are concerned about the tax implications of a widespread fraud event in unemployment claims, where more than 760,000 Ohioans had their identities stolen in the unemployment system.

“Since benefits are taxable, it is vital that victims of fraudulent claims report it immediately,” Goldstein said.

If you received a 1099G form from the Ohio Department of Job and Family Services for unemployment benefits you did not receive, report the error immediately by using their online portal or by calling 833-658-0394.

These earnings should not be reported on tax returns, since they were not actually received. However, advocates are encouraging victims of the fraud to keep all documents related to the false claim, including confirmation that the fraud was reported.

The earned income tax credit can boost the amount of money low-income families get back from filing their taxes each year. The amount of this credit is based on the amount of earned income for the person filing.

Congress identified the potential impact that widespread unemployment might have on earned income tax credit. Filers have the option to use their 2019 earned income when filing taxes this year.