$600 stimulus and Social security

[fishercz20]

I am from Minnesota. I am 62 and collect social security each month. My ceiling for earned income is around 18,250.00 per year before penalty. My question is will the $600 per week stimulus check be considered earned income and will this hurt me during tax time?

 

[PayrollHRGuy]

WHo are you getting the $600 per week from?

 

[quincy]

Are you speaking of the $600 per week boost in unemployment benefit amounts? The $600 addition is set to expire July 31.

Yes. It would be considered income and is taxable.

 

[fishercz20]

My only question is the Unemployment $600 considered earned income or a gift?

 

[PayrollHRGuy]

My only question is the Unemployment $600 considered earned income or a gift?

Social Security does not consider UI benefits as earnings.

 

[quincy]

Sorry. I added to my last post. The $600 is considered income and is taxable.

 

[PayrollHRGuy]

Sorry. I added to my last post. The $600 is considered income and is taxable.

Is it not considered the same as regular UI?

https://www.aarp.org/work/social-security/info-10-2012/can-i-get-social-security-and-unemployment-benefits-at-the-same-time.html#:~:text=Any benefits you get from,people ages 62 to 66.

 

[adjusterjack]

I am from Minnesota. I am 62 and collect social security each month. My ceiling for earned income is around 18,250.00 per year before penalty. My question is will the $600 per week stimulus check be considered earned income and will this hurt me during tax time?

Not by much. Whether it's earned or unearned income, if it's taxable and you exceed the threshold only a part of your social security benefits will be taxable.

There's a worksheet in the Form 1040 instruction booklet. You can run a few scenarios.

 

[fishercz20]

Any benefits you get from unemployment insurance will not reduce your Social Security payments. That's because Social Security does not count unemployment benefits as earnings. So the benefits will not push you closer to earnings ceilings that trigger cuts in Social Security benefits for people ages 62 to 66

 

[quincy]

Regular unemployment benefits are considered taxable income by the IRS.

If you receive social security and you also lost a job, you apply for unemployment benefits. These weekly benefit payments are typically less than what you would collect at your job, so you don’t risk reducing your social security benefits.

However, with the additional $600/week in benefits, this could inflate your weekly payment to over what your normal paycheck would have been had you kept your job.

In this case, it could be possible for you to have a temporary reduction in social security benefits.

 

[quincy]

The stimulus checks were not taxable. The unemployment is.

 

[Zigner]

Any benefits you get from unemployment insurance will not reduce your Social Security payments. That's because Social Security does not count unemployment benefits as earnings. So the benefits will not push you closer to earnings ceilings that trigger cuts in Social Security benefits for people ages 62 to 66

The SSA seems to differ:

https://www.ssa.gov/ssi/text-income-ussi.htm

WHAT IS INCOME?

Income is any item an individual receives in cash or in-kind that can be used to meet his or her need for food or shelter. Income includes, for the purposes of SSI, the receipt of any item which can be applied, either directly or by sale or conversion, to meet basic needs of food or shelter.

Types of income for SSI purposes:

• Earned Income is wages, net earnings from self–employment, certain royalties, honoraria, and sheltered workshop payments.
• Unearned Income is all income that is not earned such as Social Security benefits, pensions, State disability payments, unemployment benefits, interest income, dividends and cash from friends and relatives.

 

[quincy]

Here is a link to a Business Insider article on taxes and unemployment benefits:

https://www.businessinsider.com/personal-finance/is-the-600-unemployment-tax-free-2020-5

 

[Taxing Matters]

The SSA seems to differ:

Whoa, let's step back here and clarify a few things because I see posts here all over the place in this thread that discuss different things that can be confusing, and I'll start with your post as the jumping off point. There are three kinds of Social Security benefits: the old age benefits, disability benefits, and SSI. That matters because the requirements to receive the benefits differs.

Old age benefits become payable when you reach the minimum retirement age, which varies based on the year of your birth. Disability benefits are payable if you have a disability that prevents you from doing any substantial gainful activity (SGA). SSI is a welfare type program that is paid to persons based on low income and assets.

You linked the information for SSI. For SSI, all types of income matter and if your total income is high enough you lose the benefits. For SSI it does not matter if the income is earned or unearned income — pretty much all income counts. But it's not clear that the OP is on SSI. We need to know what kind of benefits the OP is receiving as that affects how the unemployment compensation is treated. I suspect, though, that it is old age benefits rather than SSI or disability benefits. The reason is that that the OP asked if the unemployment is EARNED income, and earned income matters for old age (retirement) benefits and disability benefits but not SSI.

However, how earned income impacts old age benefits and disability benefits differs a bit.For disability benefits it matters as that ties into SGA. If you are earning significant EARNED income that suggests that you are engaging in SGA and that may cause you to lose disability benefits. Under the tax law, unemployment compensation is NOT earned income, which addresses the question the OP asked in the first post. The law does not explicitly deny Social Security disability because of unemployment compensation. But that's not the end of it. There is an obvious conflict between getting unemployment comp and being on disability benefits. Disability you get when you can't work. To get unemployment benefits, you have to certify that you CAN work. If you can work then the disability benefits end. Thus, even though unemployment is not earned income it is still a problem for someone on disability benefits. Based on this I think it's not likely that the OP is on disability benefits.

The OP is age 62 so he or she may have elected to take early old age benefits. With old age benefits, receiving earned income can result in an offset of some of the old age retirement benefits, which is likely what the OP is concerned about. It does not result in a complete cut off of benfits, though. Because unemployment comp is not earned income it does not trigger this offset. Once a person hits the full retirement age then there is no longer a reduction in benefits due to earned income.

Quincy is correct that unemployment compensation is taxable income. That is a problem for unemployed persons trying to get by on reduced income from unemployment. If they don't make estimated tax payments or at least put aside the money for the tax on the benefits they can find themselves owing the IRS come time to file their return.

Adjusterjack is correct that the more taxable income you have the more of your Social Security benefits will be subject to tax. So unemployment benefits when added in with any other income the OP has may result in more of the Social Security being taxed.

 

[Taxing Matters]

My only question is the Unemployment $600 considered earned income or a gift?

I answered that in my previous post but considering I put a lot of other stuff in there I'll provide you a direct answer here. Unemployment compensation is not earned income but it is also not a gift. So if you are receiving old age (retirement) Social Security benefits it will not result in a reduction of your benefits.

However, unemployment compensation is taxable income to you, just like most other unearned income like interest, dividends, rents, etc. You will get a 1099 form from the state telling you how much you got in unemployment benefits and you'll need to include that as income on your 2020 tax return when you file it next year. The more income you have the more of your Social Security benefits that become taxable income, too. So the unemployment comp may increase how much of your Social Security benefits are taxable income, too. That kind of double whammy sucks when you are living on an income that is less than you were getting when you were working, but unfortunately that's the way the tax law works in this situation.

If you are getting Social Security disability payments or SSI payments then the unemployment may indeed impact how much Social Security benefits you get.