Michigan jobless claimants won't get key tax form until end of February

Did you collect jobless benefits in 2021? Then you're going to need to sit back and wait to file your federal income tax return until you make sure you have all the right numbers in hand.

Michigan residents now are looking at an extra long delay in receiving key tax paperwork from the state Unemployment Insurance Agency.

The state UIA said Monday that 1099-G forms now will be sent toward the end of February — instead of the typical Jan. 31 deadline.

The 1099-G spells out how much a jobless worker received in unemployment benefits, as well as any income tax that might have been withheld the past year.

"UIA asked for and received an extension from the Internal Revenue Service," according to a press release issued Monday.

“Our top priority is ensuring that Michiganders have the most accurate information when completing their taxes," said UIA Director Julia Dale in a statement Monday.

“This additional time will help us get the correct amount so taxpayers can complete their state and federal tax returns.”

The state wants more time to seek a resolution for Michigan workers who received notices for overpayments and collection activity related to non-fraudulent claims filed during the pandemic.

"UIA has requested additional waivers from the U.S. Department of Labor to ensure that no Michiganders are negatively impacted for doing the right thing," the state said.

Nearly 700,000 claimants were asked by the state’s UIA to “requalify” for unemployment benefits over the summer because the state is using a waiver process authorized by the U.S. Department of Labor. Many of those claimants, though, have yet to receive waivers.

The agency needs more time to program the system for issuing the 1099-G forms to take into account any impact waivers would have on tax withholding.

Last year, Michigan residents who received jobless benefits in 2020 were able to request that their 1099-G be sent to them electronically through their MiWAM account and they ended up receiving those statements on Jan. 9, 2021. The remainder were sent out in batches by mail with the last ones hitting mailboxes in the last week of January 2021.

But those forms for tax year 2021 were not in hand yet by the end of this January. Many consumers who collected jobless benefits in 2021 began worrying that those forms wouldn't be available till much later. The state confirmed those rumors in a press release late Monday afternoon.

Early filers hurt by delays

The deadline to file a federal income tax return and an income tax return for the state of Michigan is April 18 this year. People have plenty of time to meet the deadline.

But millions of people file months before April in order to claim their tax refund cash as soon as possible.

Matthew S. Kidd, a certified public accountant and partner for Blunden & Kidd Accounting & Consulting, P.C., in Livonia, said taxpayers who have simple returns and typically file early in the season might be upset by any delays in receiving a 1099-G.

"Often that group files early because they only have W-2 or retirement income and anticipate a refund," he said.

"It may cause some stress or hardship that they are unable to file until receiving their 1099-G," Kidd said.

Another big worry: Will some taxpayers forget — or not realize — that they need to claim jobless benefits and simply file a return before they receive a 1099-G? Doing so will create headaches down the road — and still likely delay refunds.

"Taxpayers have had a hard time remembering when and how much they received between unemployment, economic impact payments and child tax credit payments," said Kidd, who is also a board member for the Michigan Association of CPAs.

More: IRS Letter 6475 can help you claim any extra stimulus cash owed: 5 things to know

More: 5 things to know about IRS Letter 6419 and the child tax credit

More: Several Michigan unemployment insurance claimants file class-action lawsuit against agency

More: Coalition of UI advocates ask Whitmer for waivers for claimants with overpayment letters

Why do you need a 1099-G?

Tax filers need to report the exact dollar amount they received for unemployment compensation last year on their 2021 federal income tax return.

And yes, that unemployment compensation is treated as taxable income on the federal return and the Michigan income tax return.

Many people, of course, could be stumped when it comes to whether jobless benefits will be taxed or not. The rules did change temporarily for unemployment benefits collected in 2020 but we're back to the old rules for jobless benefits collected in 2021.

"It can be very confusing," said Mark Steber, Jackson Hewitt’s chief tax information officer.

Once you have the Form 1099-G, you need to see Box 1. You're going to need to claim payments of $10 or more in unemployment compensation, including Railroad Retirement Board payments for unemployment.

You'd report this taxable income on Schedule 1 of the Form 1040, Line 7.

In Michigan, the state noted Monday that once ready, the 1099-G forms will be posted to Michigan Web Account Manager, known as MiWAM accounts, for those tax filers who have requested an electronic copy.

Claimants who previously did not request an electronic copy of their 1099-G can still do so by logging into MiWAM, going to Under Account Alerts and then clicking on “Select a delivery preference for your Tax Form 1099-G.”

You can choose “electronic.”

If you do not request an electronic copy, the state will send your 1099-G through the mail.

Jobless benefits aren't treated the same on 2021 returns as last year

People may be confused because the rules changed temporarily for many people last year, thanks to some pandemic-related relief efforts.

Taxpayers received a surprising tax break relating to unemployment benefits received in 2020 only, as part of a $1.9 trillion stimulus package, which was signed into law in March 2021.

As part of the American Rescue Plan, many taxpayers were no longer required to pay taxes on up to $10,200 in unemployment benefits received in 2020. The exclusion was up to $10,200 of jobless benefits for each spouse for married couples.

Not everyone was covered by that temporary break.

The special provision to waive taxes on some unemployment income applied only to those who made less than $150,000 in adjusted gross income in 2020.

But that tax break doesn't exist for 2021 returns —and it may not come back at all.

"There's no exclusion this year. But last year at this point there was no exclusion either," said Mark Luscombe, principal analyst for Wolters Kluwer Tax & Accounting.

Luscombe and other tax experts do not expect any last-minute changes, though, as there has been no big push in Congress to exclude some jobless benefits from taxes in 2021.

"At this point," Luscombe said, "all unemployment compensation is 2021 is fully taxable and I'm not expecting an exclusion to be adopted."

If you had taxes withheld on jobless benefits, the federal taxes are withheld at a 10% rate.

Many people who are financially strapped when they lose a job, though, often do not have taxes withheld. They could owe taxes when they file their 2021 income tax returns. But some key tax credits also can come into play so not everyone will necessarily owe money.

Free Press staff writer Adrienne Roberts contributed to this report.

Contact Susan Tompor via stompor@freepress.com. Follow her on Twitter @tompor. To subscribe, please go to freep.com/specialoffer. Read more on business and sign up for our business newsletter.

This article originally appeared on Detroit Free Press: Jobless benefits taxable — and Michigan residents face new 1099 delay