This post has to do with what COVID-19 federal stimulus ($1,200) and federal unemployment ($600/week) payments are taxable, along with CA state unenployment benefits.
My daughter was self employed but due to the virus, she could no longer interact with her clients. She applied for CA unemployment.
As a result, she got:
1) the $1,200 advance tax credit2) a $167 weekly check from CA Employee Development Department (EDD), which included an additional
3) $600 per week, from the FedsThe $167 check was the first to come, and she authorized a 10% withholding, $17, for Federal taxes.
After two weeks, the check (actually, these are direct deposits) included the $600, for a total of $167 CA + $600 Federal -$17 Federal tax = $750. She also got a paper form to fill out every two weeks stating if she found work, and allowing her to check the box to withhold 10% for Federal taxes. She thought it was curious that there was no box to authorize a larger Federal withholding for the additional $600/week.
So the questions are:
1) CA unemployment is not taxable by CA, but is by the Feds, thus the 10% withholding on the CA $167. Yes?2) She assumes the $600 "Federal unemployment" is also taxable by the Feds, even though there was no place on the CA EDD paper form to have it withheld. Yes?
3) If the $600 is taxable by the Feds, it will appear as income on her Federal tax return. Will this "Federal unemployment" be taxable by CA? My suspicions are 'yes', but I've researched this and cannot find an answer.One final bit of information...
She did establish an other self employment activity by making custom hand- made articles and selling them on a well-known website. The business is doing well, and the website will be sending her a 1099-G,
When she gets the next paper form from the CA EDD, (sorry, don't have the form in front of me, and can't remember the form name/number), she will state that she has 'found work' and the form will ask, if so, 'how much did you make'? Because she just started the business, it's hard to determine 'how much'. Gross? Net? Will CA reduce her last check by the amount entered?
What she is most worried about is that the CA EDD keeps sending her the $167 - $17 check even though she's said she is now working, and because of my dealing with the CA EDD, I don't blame her. If she receives these $150 checks, what should she do? My thought is all she can do is not fight city hall, and since Federal taxes are already withheld, and there's no CA tax liability, just accept the money, and claim on her tax returns.
Thanks if you've read this far.