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American taxes are so screwed up. Many typical hackernews folks may not be aware but potentially hundreds of thousands if not millions of people are realizing t

American taxes are so screwed up. Many typical hackernews folks may not be aware but potentially hundreds of thousands if not millions of people are realizing that they owe taxes on the unemployment income they received when they lost their job this year. Nothing like getting a stimulus check and then giving it all to the IRS plus some.

gruez 6y ago
How is that screwed up? Unemployment income is still income. It works the same way in canada as well[1]. I get why it sounds stupid on the surface (ie. why is the government giving you money, then asking to give a portion back?), but it makes sense if you think about it. Otherwise unemployment disproportionately benefits high income earners because it's tax-free. [1] https://www.canada.ca/en/revenue-agency/news/2021/02/government-of-canada-announces-targeted-interest-relief-on-2020-income-tax-debt-for-low--and-middle-income-canadians.html https://www.canada.ca/en/revenue-agency/news/2021/02/governm...
- LinuxBender 6y ago
  That is probably a strong term. What term best applies to money that has been taxed multiple times?
  - gruez 6y ago
    How are you getting taxed multiple times? I'm not sure how it applies to unemployment income.
    - LinuxBender 6y ago
      That money comes from tax revenue. You already paid taxes on your income once. Now you are getting taxed on it again when it recycles back to you. You will also get taxed on it again when you spend it. There is a flow chart somewhere that shows the myriad of ways the same money is repeatedly taxed.
      - kube-system 6y ago
        Yes, this is exactly what it means to have income and consumption taxes. If you buy an ice cream for $1, that is $1 of consumption and $1 of income.
      - gruez 6y ago
        >That money comes from tax revenue. Technically it comes from unemployment insurance premiums. Wikipedia says: In the United States, benefits are funded by a compulsory governmental insurance system, not taxes on individual citizens. It's easy to imagine some sort of alternate reality where the unemployment insurance system is handled by a private company, for instance. Moreover, calling it double-tax doesn't really make any sense because the tax is on the income, not the dollar itself. Public sector employees aren't getting double-taxed because part of their salary goes to the government, which pays for their paycheck. You're also not taxed infinity-taxed because your paycheck comes from a business which is taxed, which gets its revenue from a consumer which is taxed, which gets their paycheck from a business which is taxed...
        LinuxBender 6y ago
        If it isn't a tax, then may I opt out of it and/or get all the money back I put into it? My current strategy is government grants to fund project I want to do regardless, but I don't think that will ever really break even.
- westpfelia 6y ago
  I think people think its messed up because most people are using the very little money they are given just to not be evicted or buy food. No one is saving it. So the idea that people will be able to cover it in taxes is... well honestly laughable.
  - gruez 6y ago
    Well I guess the alternative would be to withhold part of the stimulus/unemployment checks. That would result in less surprises come tax time, but it also means less money paid out (the amount withheld is basically a interest-free loan from the government).
    - Taylor_OD 6y ago
      Or just not tax unemployment...
- rectang 6y ago
  The fact that it is surprising to many people is a problem, whether or not it makes sense to you or makes sense in the abstract.
- jerry1979 6y ago
  We should not expect people to devote lots of energy towards frivolous bureaucratic errands. If everyone who collected unemployment correctly identified the tax implications and budgeted appropriately then we would have a very screwed up problem on our hands: a drone-like population of box-checkers who shockingly ignore more important aspects of life.
  - gruez 6y ago
    >If everyone who collected unemployment correctly identified the tax implications and budgeted appropriately then we would have a very screwed up problem on our hands: a drone-like population of box-checkers who shockingly ignore more important aspects of life. I think you're being hyperbolic here. If you knew about this it takes less than 5 minutes for you to get out a calculator and figure out how much you need to have on reserve. If you didn't know about this add in 10-15 minutes to research it. That doesn't seem like very onerous to me. Some sibling commenters also mentioned that some state's unemployment application contain a checkbox asking whether they want their income tax to be withheld for them, which reduces the time spent to 5 seconds.
    - jerry1979 6y ago
      Yup, I intentionally made my comment a little hyperbolic, but I really want to drive attention to the "everyone" portion of my comment. The errand everyone must correctly perform punishes the most at-risk for failure. If everyone complied perfectly, then the IRS would not ding anyone, but also the population would likely resemble a sad army of soulless drones. Instead thousands upon thousands of bureaucratic errands end up stacked on sticky kitchen tables next to crying children and loud-talking relatives. Life has way more to offer than pithy remarks from suits about box checking especially when the penalties the suits hand out deal such crushing blows to the people at the kitchen table.
- Taylor_OD 6y ago
  It's screwed up because we give people a very small amount of income to help them while they are seeking another job and then tax them on that small income. Why does it need to be taxed? The max unemployment given per month does not cover rent for most people in a mid to high cost of living area. It just seems insane to decide that that income should be taxed as well.
iscrewyou 6y ago
When you fill out the certification for unemployment, there is a question that states exactly that: would like us to hold the tax or will you pay it later? I helped someone go through the process. It definitely does for California.
michaelcampbell 6y ago
> Nothing like getting a stimulus check and then giving it all to the IRS plus some. In what situation is the income tax over 100%
- eloff 6y ago
  The taxes on unemployment income can easily exceed the stimulus amount, because they're two different things. I don't think the stimulus checks themselves are taxed, but I'm not an American and I don't know for sure.
  - dkjaudyeqooe 6y ago
    Stimulus checks are a refundable tax credit, ie a tax refund. They cannot be taxed, but in some cases they can be seized by the IRS.
  - michaelcampbell 6y ago
    That's moving the goalposts. The OP makes it sound like given an income "X", adding the stimulus to that will cause the IRS to not only take all the stimulus, but also some of X. My question is, under what circumstance would getting a gov't stimulus payment actually net you less money than not, all else being equal.
    - eloff 6y ago
      That's not how I read it.
    - Taylor_OD 6y ago
      I meant anyone who got roughly 7.5K in unemployment or more and did not choose to get taxes taken out of it will likely end up owing whatever stimulus check they may receive and then some.
glitchc 6y ago
Unemployment income is taxed as regular income in every jurisdiction I am aware of. Not sure where this outrage is coming from. And as the previous reply explains, it makes sense as to why that happens.
Taylor_OD 6y ago
As an update on this... The latest stimulus package included 10K+ of unemployment income tax forgiveness. I'm glad the folks in DC realized how many people were going to end up with very expensive tax bills this year.

gruez 6y ago

How is that screwed up? Unemployment income is still income. It works the same way in canada as well[1]. I get why it sounds stupid on the surface (ie. why is the government giving you money, then asking to give a portion back?), but it makes sense if you think about it. Otherwise unemployment disproportionately benefits high income earners because it's tax-free. [1] https://www.canada.ca/en/revenue-agency/news/2021/02/government-of-canada-announces-targeted-interest-relief-on-2020-income-tax-debt-for-low--and-middle-income-canadians.html https://www.canada.ca/en/revenue-agency/news/2021/02/governm...

LinuxBender 6y ago
That is probably a strong term. What term best applies to money that has been taxed multiple times?
- gruez 6y ago
  How are you getting taxed multiple times? I'm not sure how it applies to unemployment income.
  - LinuxBender 6y ago
    That money comes from tax revenue. You already paid taxes on your income once. Now you are getting taxed on it again when it recycles back to you. You will also get taxed on it again when you spend it. There is a flow chart somewhere that shows the myriad of ways the same money is repeatedly taxed.
    - kube-system 6y ago
      Yes, this is exactly what it means to have income and consumption taxes. If you buy an ice cream for $1, that is $1 of consumption and $1 of income.
    - gruez 6y ago
      >That money comes from tax revenue. Technically it comes from unemployment insurance premiums. Wikipedia says: In the United States, benefits are funded by a compulsory governmental insurance system, not taxes on individual citizens. It's easy to imagine some sort of alternate reality where the unemployment insurance system is handled by a private company, for instance. Moreover, calling it double-tax doesn't really make any sense because the tax is on the income, not the dollar itself. Public sector employees aren't getting double-taxed because part of their salary goes to the government, which pays for their paycheck. You're also not taxed infinity-taxed because your paycheck comes from a business which is taxed, which gets its revenue from a consumer which is taxed, which gets their paycheck from a business which is taxed...
      - LinuxBender 6y ago
        If it isn't a tax, then may I opt out of it and/or get all the money back I put into it? My current strategy is government grants to fund project I want to do regardless, but I don't think that will ever really break even.
westpfelia 6y ago
I think people think its messed up because most people are using the very little money they are given just to not be evicted or buy food. No one is saving it. So the idea that people will be able to cover it in taxes is... well honestly laughable.
- gruez 6y ago
  Well I guess the alternative would be to withhold part of the stimulus/unemployment checks. That would result in less surprises come tax time, but it also means less money paid out (the amount withheld is basically a interest-free loan from the government).
  - Taylor_OD 6y ago
    Or just not tax unemployment...
rectang 6y ago
The fact that it is surprising to many people is a problem, whether or not it makes sense to you or makes sense in the abstract.
jerry1979 6y ago
We should not expect people to devote lots of energy towards frivolous bureaucratic errands. If everyone who collected unemployment correctly identified the tax implications and budgeted appropriately then we would have a very screwed up problem on our hands: a drone-like population of box-checkers who shockingly ignore more important aspects of life.
- gruez 6y ago
  >If everyone who collected unemployment correctly identified the tax implications and budgeted appropriately then we would have a very screwed up problem on our hands: a drone-like population of box-checkers who shockingly ignore more important aspects of life. I think you're being hyperbolic here. If you knew about this it takes less than 5 minutes for you to get out a calculator and figure out how much you need to have on reserve. If you didn't know about this add in 10-15 minutes to research it. That doesn't seem like very onerous to me. Some sibling commenters also mentioned that some state's unemployment application contain a checkbox asking whether they want their income tax to be withheld for them, which reduces the time spent to 5 seconds.
  - jerry1979 6y ago
    Yup, I intentionally made my comment a little hyperbolic, but I really want to drive attention to the "everyone" portion of my comment. The errand everyone must correctly perform punishes the most at-risk for failure. If everyone complied perfectly, then the IRS would not ding anyone, but also the population would likely resemble a sad army of soulless drones. Instead thousands upon thousands of bureaucratic errands end up stacked on sticky kitchen tables next to crying children and loud-talking relatives. Life has way more to offer than pithy remarks from suits about box checking especially when the penalties the suits hand out deal such crushing blows to the people at the kitchen table.
Taylor_OD 6y ago
It's screwed up because we give people a very small amount of income to help them while they are seeking another job and then tax them on that small income. Why does it need to be taxed? The max unemployment given per month does not cover rent for most people in a mid to high cost of living area. It just seems insane to decide that that income should be taxed as well.

iscrewyou 6y ago

When you fill out the certification for unemployment, there is a question that states exactly that: would like us to hold the tax or will you pay it later? I helped someone go through the process. It definitely does for California.

michaelcampbell 6y ago

> Nothing like getting a stimulus check and then giving it all to the IRS plus some. In what situation is the income tax over 100%

eloff 6y ago
The taxes on unemployment income can easily exceed the stimulus amount, because they're two different things. I don't think the stimulus checks themselves are taxed, but I'm not an American and I don't know for sure.
- dkjaudyeqooe 6y ago
  Stimulus checks are a refundable tax credit, ie a tax refund. They cannot be taxed, but in some cases they can be seized by the IRS.
- michaelcampbell 6y ago
  That's moving the goalposts. The OP makes it sound like given an income "X", adding the stimulus to that will cause the IRS to not only take all the stimulus, but also some of X. My question is, under what circumstance would getting a gov't stimulus payment actually net you less money than not, all else being equal.
  - eloff 6y ago
    That's not how I read it.
  - Taylor_OD 6y ago
    I meant anyone who got roughly 7.5K in unemployment or more and did not choose to get taxes taken out of it will likely end up owing whatever stimulus check they may receive and then some.

glitchc 6y ago

Unemployment income is taxed as regular income in every jurisdiction I am aware of. Not sure where this outrage is coming from. And as the previous reply explains, it makes sense as to why that happens.

Taylor_OD 6y ago

As an update on this... The latest stimulus package included 10K+ of unemployment income tax forgiveness. I'm glad the folks in DC realized how many people were going to end up with very expensive tax bills this year.