Raleigh, NC – Most people who were unemployed last year were not subject to state income taxes so they may be billed when those taxes are due in May.
North Carolina is one of several states that have not enacted federal tax policies that have exempted the first $ 10,200 in unemployment benefits from income tax, according to a count by H&R Block.
For people who were unemployed last year, it means they won’t have to pay taxes to the government on the first $ 10,200 in unemployment benefits. If you’ve already paid those taxes through withholding tax, the IRS will send a refund. But when it comes to state income taxes, they are taxed as usual.
The North Carolina General Assembly could change that, but there is no obvious step in doing so.
“I don’t think we’re going to do that,” said Julia Howard, chairwoman of home finance, on Friday. “It’s always been something that is taxed.”
However, the General Assembly is looking at a tax change that would save companies across the state $ 367 million.
The state’s Department of Employment Security said it sent around 950,000 1099-G notices to people receiving unemployment benefits in 2020, and that about 530,000 of them – nearly 60 percent – chose not to withhold state taxes as they made weekly payments received.
Neither DES nor the Treasury Department were able to estimate how much these people would owe in the next month on Friday, but it is clear that the state could reduce its tax burden by complying with federal policies.
“I don’t understand why some states do this and others don’t,” said Randy Gilliland, a Siler City man who was unemployed in 2020 and turned to WRAL News this week to see the logic behind it. “
“Thank goodness in heaven I took my taxes out,” said Gilliland. “I feel sorry for those other people who didn’t.”
Both the state and federal government have postponed tax day by about a month from April 15 to May 17 this year, and the Treasury Department has said it will not impose penalties on anyone who owes tax until the new date Submit.
However, a change in state law is required to waive the interest accruing that month. That change is coming, according to Howard, R-Davie, who said the legislation on the matter is likely to go into effect next week.
Governor Roy Cooper supports this interest waiver, according to his press office. He hasn’t asked lawmakers to waive state income taxes for the unemployed, but spokesman Ford Porter said he was ready to discuss it.
“The governor is open to this and expects to speak to lawmakers about it,” Porter said this week.
Lawmakers are working to reduce the tax burden on companies that received money from the Paycheck Protection Program, a forgivable loan designed to deter companies from laying off people during the pandemic.
House Bill 334 and Senate Bill 112 would allow companies to deduct the cost of the loans, a change that legislative analysis of the law suggests would cost the state $ 367 million in revenue for the next fiscal year.
Typically, federal tax law treats loans issued as income and does not allow any deductions for the expenses they cover. The IRS initially said expenses covered by PPP loans would be treated this way, but Congress later reversed the policy.
The bills that are going through the legislature would bring North Carolina in line with current federal policy on PPP lending, but not on unemployment.
Senator Jim Burgin, R-Harnett, a co-sponsor of the PPP bill, said the two topics were “apples and oranges” and noted that the PPP loans were used to keep the workers busy. Businesses that kept employees going had to bear a ton of costs, including setting up mobile offices, he said.
“It will be our business that will get us out of this,” said Burgin.