With tax season well underway, many Americans who lost their jobs due to the coronavirus pandemic and found some relief in supercharged unemployment benefits last year are discovering that they now owe the federal government hundreds—even thousands—of dollars in surprise payments, an economic nightmare for low-income people and a looming political catastrophe for the party currently in power.
Because unemployment benefits in the United States are classified as taxable income, a potentially significant portion of the estimated 40 million Americans who received unemployment insurance (UI) in 2020 "will be in for a rude awakening" when they find out "they are on the hook for thousands of dollars in owed income taxes at the federal and, in some cases, the state level," Brian Galle and Elizabeth Pancotti warned in a report for The Century Foundation last month.
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