Avoid pandemic-related surprises come tax season - Albuquerque Journal

Avoid pandemic-related surprises come tax season

If you’re like a lot of New Mexicans, you may be in a radically different tax situation now than you were in heading into 2020.

This year has brought an unprecedented number of layoffs, furloughs and other job changes, and many of us found ourselves relying on unemployment and other government programs when we may not have been expecting to.

While those programs have proven to be lifelines for many, they do come with a catch: Some of the benefits from these programs are taxable, and it could leave many New Mexicans facing a tax payment they weren’t expecting.

“I’m just concerned that this is going to raise its ugly head and become a problem for people come tax time in the spring,” said Dorothy Wood, state administrative specialist for the AARP Foundation’s Tax-Aide Program.

The COVID-19 pandemic and restrictions put in place to contain it have wrought havoc on unemployment systems in New Mexico and across the country.

In response to a nationwide spike in unemployment due to the COVID-19 pandemic, the federal government rolled out a slate of new unemployment programs, including the Pandemic Unemployment Compensation program, which provided an additional $600 per week to unemployment recipients earlier this year, and Pandemic Unemployment Assistance, which provided benefits to people who don’t typically qualify for unemployment.

Earlier this year, as many as 156,000 New Mexicans were receiving state or federal unemployment benefits, the vast majority of whom were employed in 2019.

Because of all the new state and federal programs that have popped up in response to the pandemic, and because a lot of the people receiving unemployment haven’t done so in the past, Wood said she’s worried that people will be surprised by the nuances of some programs.

“It’s very possible we’ll get some people who are blindsided,” Wood said.

Gene Varela, state coordinator for the Tax-Aide program, didn’t provide specifics on how much New Mexicans enrolled in various programs could owe come tax season. But he said even programs that don’t provide benefits may end up costing New Mexicans who aren’t paying attention.

Varela cited the Earned Income Tax Credit – a federal program that offers a tax credit to low- and moderate-income workers – as a program that could cost newly unemployed people. To qualify for the program, Varela said people have to be working. If they aren’t working, they may end up not receiving a tax credit that they’ve grown accustomed to.

“It’s going to be a different season for taxpayers,” Varela said.

With that in mind, the Internal Revenue Service is reminding people receiving unemployment that they can opt to have tax withheld from their benefits now to help avoid owing taxes on their income when they file next year. Those looking to do so may fill out a Voluntary Withholding Request form and send it to the agency paying the benefits, according to the IRS.

Taxable benefits include any of the unemployment programs under the federal CARES Act. However, IRS regional spokesman David Tucker said the one-time federal $1,200 stimulus payment distributed earlier in the year will not be taxable.

Tucker said additional information on the tax status of various state programs, including New Mexico’s recently approved one-time $1,200 unemployment payment, will be available early next year.

Stephen Hamway covers economic development, health care and tourism for the Journal. He can be reached at shamway@abqjournal.com.


Home » Business » Business Columns » Avoid pandemic-related surprises come tax season

Insert Question Legislature form in Legis only stories

Albuquerque Journal and its reporters are committed to telling the stories of our community.

• Do you have a question you want someone to try to answer for you? Do you have a bright spot you want to share?
   We want to hear from you. Please email yourstory@abqjournal.com

taboola desktop

ABQjournal can get you answers in all pages


Questions about the Legislature?
Albuquerque Journal can get you answers
Email addresses are used solely for verification and to speed the verification process for repeat questioners.
Couple behind Mountaintop Extracts shifted the cannabis space in ...
ABQnews Seeker
The goal, Eric Merryman said, was ... The goal, Eric Merryman said, was to create safety standards for cannabis extraction — and to offer up the highest-quality products possible for patients.
$35M apartment complex breaks ground in Albuquerque's Northeast Heights
ABQnews Seeker
Titan Development broke ground on Tuesday ... Titan Development broke ground on Tuesday on a 105-unit apartment building in the Northeast Heights. The $35 million project, at 6925 Alameda NE, is ...
Restaurant inspections: Italian, sushi restaurants in the red
ABQnews Seeker
Two restaurants are in the red ... Two restaurants are in the red this week.
Business Column: In financial matters, government role has upside ...
ABQnews Seeker
Politics is directly intersecting with the ... Politics is directly intersecting with the economy — macro, micro, public and personal — in a not-so-rare standoff in Washington, D.C.
Jobs in New Mexico: Unemployment rate unchanged, but jobs ...
ABQnews Seeker
New Mexico's unemployment remained unchanged in ... New Mexico's unemployment remained unchanged in April but preliminary unemployment numbers suggest the state added nearly 3,000 workers over the prior month.
Median sales price reaches all-time high in ABQ metro ...
ABQnews Seeker
After a drop-off in January, the ... After a drop-off in January, the median sales price for a single-family detached home has reached an all-time high — $344,040 in April for ...
The last ride: 46-year-old Bike Coop has closed
ABQnews Seeker
After moving from its original location ... After moving from its original location on Central, the Bike Coop has been selling wheels at 120 Yale SE since 2013.
No more 'Breaking Bad' — Rebel Donut to close ...
ABQnews Seeker
Beloved Albuquerque doughnut shop Rebel Donut ... Beloved Albuquerque doughnut shop Rebel Donut is closing its doors next week on Thursday, June 15.
Stock market today: Wall Street inches higher toward edge ...
Most Recent Biz News
NEW YORK (AP) -- U.S. stocks ... NEW YORK (AP) -- U.S. stocks are drifting Tuesday amid a vacuum of market-moving data, while U.S. regulators shook the cryptocurrency world again by ...