$600 stimulus and Social security

[quincy]

... 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 ...

What I quoted above of your post, Taxing Matters, is what I believed fishercz20 was referring to when he cited his age and said he is collecting “social security” benefits and has a “ceiling” on what he can earn.

It might have helped if I paid more attention to the “earned” part of his query, though. Haha.

Your explanation was nice.

 

[LdiJ]

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?

That isn't a stimulus check that is expanded unemployment. Unemployment is income for tax purposes, so it could make more of your social security taxable. I have no idea whether or not it will be treated as normal unemployment compensation come time for 2020 taxes. I have not seen anything on the subject so far.

 

[quincy]

That isn't a stimulus check that is expanded unemployment. Unemployment is income for tax purposes, so it could make more of your social security taxable. I have no idea whether or not it will be treated as normal unemployment compensation come time for 2020 taxes. I have not seen anything on the subject so far.

In all that I’ve read about the $600, I have found only no-answer answers like “generally” any unemployment benefits would be taxable.

 

[LdiJ]

In all that I’ve read about the $600, I have found only no-answer answers like “generally” any unemployment benefits would be taxable.

I know. I am not even sure that someone at the IRS (If you could get through to them) could answer that question right now.

 

[Just Blue]

What I quoted above of your post, Taxing Matters, is what I believed fishercz20 was referring to when he cited his age and said he is collecting “social security” benefits and has a “ceiling” on what he can earn.

It might have helped if I paid more attention to the “earned” part of his query, though. Haha.

Your explanation was nice.

Taxing Matter is always nice.

 

[quincy]

I know. I am not even sure that someone at the IRS (If you could get through to them) could answer that question right now.

The IRS is probably as confused as everyone else.

I think everyone is sort of waiting for the time when we can finally sit down, breathe a bit, and start to assess pretty much everything.

 

[Taxing Matters]

The IRS is probably as confused as everyone else.

I think that unlikely, actually. At least not in IRS Chief Counsel, which is the office within the IRS that has the lawyers and determines the legal positions of the IRS. The CARES Act treats the extra $600 in payments as an add-on to the regular unemployment benefits and thus are also unemployment benefits too. Even if there was doubt about that, Internal Revenue Code (IRC) § 61 defines gross income to mean "all income from whatever source derived". This sets up a rule that all income is taxable unless the IRC states otherwise. Congress did not provide in the CARES Act any provision that states these payments are not included in income. As a result, unless Congress enacts a technical corrections bill that includes such a provision these payments are taxable income. There is really no doubt about that. Indeed, my review of online articles about this reveal that most state very clearly that the payments are taxable. The PA state UC site specifically says as much, for example:

Yes, FPUC is taxable and will be subject to 10% Federal Withholding Tax, if you elected to have taxes withheld from your regular UC or PUA benefits. For information about changing your election visit our Taxes on Benefits page. ​

FPUC refers to Federal Pandemic Unemployment Compensation. That's one of the 3 types of extra UC benefits that are provided under the CARES act, but the tax treatment of all 3 will end up the same. Wisconsin Department of Workforce Development, which is the Wisconsin UC agency, says this about all 3 programs:

Yes, those payments are considered income for federal and state tax purposes. You can ask to have state and federal taxes withheld from your unemployment payments. If you decide to have taxes withheld, we will deduct 10% for federal taxes and/or 5% for state taxes from your weekly benefit payment.​

Based on my experience having worked as an attorney/manager in Chief Counsel my guess is that the reason the IRS has not issued any statement on it is because in their mind the answer is as clear as it is to me, and they believe that it will be just as clear to every one else, or at least to the tax professionals out there.

I think everyone is sort of waiting for the time when we can finally sit down, breathe a bit, and start to assess pretty much everything.

And hopefully that's sooner rather than later.

 

[quincy]

I think that unlikely, actually. At least not in IRS Chief Counsel, which is the office within the IRS that has the lawyers and determines the legal positions of the IRS. The CARES Act treats the extra $600 in payments as an add-on to the regular unemployment benefits and thus are also unemployment benefits too. Even if there was doubt about that, Internal Revenue Code (IRC) § 61 defines gross income to mean "all income from whatever source derived". This sets up a rule that all income is taxable unless the IRC states otherwise. Congress did not provide in the CARES Act any provision that states these payments are not included in income. As a result, unless Congress enacts a technical corrections bill that includes such a provision these payments are taxable income. There is really no doubt about that. Indeed, my review of online articles about this reveal that most state very clearly that the payments are taxable. The PA state UC site specifically says as much, for example:

Yes, FPUC is taxable and will be subject to 10% Federal Withholding Tax, if you elected to have taxes withheld from your regular UC or PUA benefits. For information about changing your election visit our Taxes on Benefits page. ​

FPUC refers to Federal Pandemic Unemployment Compensation. That's one of the 3 types of extra UC benefits that are provided under the CARES act, but the tax treatment of all 3 will end up the same. Wisconsin Department of Workforce Development, which is the Wisconsin UC agency, says this about all 3 programs:

Yes, those payments are considered income for federal and state tax purposes. You can ask to have state and federal taxes withheld from your unemployment payments. If you decide to have taxes withheld, we will deduct 10% for federal taxes and/or 5% for state taxes from your weekly benefit payment.​

Based on my experience having worked as an attorney/manager in Chief Counsel my guess is that the reason the IRS has not issued any statement on it is because in their mind the answer is as clear as it is to me, and they believe that it will be just as clear to every one else, or at least to the tax professionals out there.



And hopefully that's sooner rather than later.

There are enough questions asked about the $600 and how to treat it that it would be helpful for the IRS to make this clear to those who are not tax professionals, and who do not intend to use a tax professional. You say it is clear. But it obviously is not.

 

[Taxing Matters]

There are enough questions asked about the $600 and how to treat it that it would be helpful for the IRS to make this clear to those who are not tax professionals, and who do not intend to use a tax professional. You say it is clear. But it obviously is not.

Let me put it this way: the law is clear that it's taxable income. But to the extent that taxpayers may not be sure about that they should consult a tax professional until such time as the IRS provides an explicit answer to that, which may not come until it prepares instructions for the 2020 returns this fall.

 

[quincy]

Let me put it this way: the law is clear that it's taxable income. But to the extent that taxpayers may not be sure about that they should consult a tax professional until such time as the IRS provides an explicit answer to that, which may not come until it prepares instructions for the 2020 returns this fall.

You did not need to put it in a different way.