What to know about unemployment benefits and your taxes

INDIANAPOLIS (WISH) — The state of Indiana has sent out more than $8 billion in unemployment benefits.

According to the Department of Workforce Development, close to 900,000 people have collected unemployment benefits since March of last year.  At the height of the pandemic, according to the state, 450,000 people filed for unemployment in one week of May of 2020.

Indiana University professor Greg Geisler says the federal government has exempted a portion of the unemployment benefits from federal income taxes. 

“Well, the first $10,200 is excluded from income on the federal tax return. In other words, it is not taxable. But Indiana decoupled from that federal tax law; you have to add back the $10,200 to your Indiana tax return,” Geisler said.  

The Indiana tax would be around $500, Geisler says, but that will vary depending on your particular tax situation. 

Another issue is stimulus money. If you didn’t receive a stimulus check and qualify within the guidelines set by Congress, you can claim that money on your federal return.  

“There is the recovery rebate credit on the federal 2020 tax return. The problem with that is the Internal Revenue Service is worried that a lot of people are claiming it but they got all their stimulus money already,” Geisler said.

Geisler says the IRS is setting aside millions of 2020 returns with the recovery rebate credit to double-check the taxpayer didn’t already receive the money. 

“It will probably take months for them to look at it and then decide are you entitled to that entire refund that you claimed,” Geisler said.  

The IRS is still processing millions of 2019 returns and if you a file a 2020 paper return, don’t expect a refund until later in the summer or possibly early fall.