Tax Law Insights

Many South Carolinians who have been furloughed or laid-off from work have received unemployment benefits from the South Carolina Department of Workforce.  These benefits have been increased under the federal Coronavirus Aid, Relief, and Economic Security Act (CARES Act), and where an individual can be paid up to $926/week for 33 weeks.

The CARES Act significantly expanded unemployment benefits for workers impacted by the Coronavirus (COVID-19) outbreak. For unemployed workers, the CARES Act funds the following additional benefits under South Carolina’s unemployment compensation laws:

1. Up to 13 additional weeks of benefits to individuals who have exhausted their regular South Carolina unemployment compensation (20 weeks; now up to 33 weeks total);
2. An additional $600/week, and on top of the payment received from the state under its existing unemployment benefits law (up to $326/week + $600/week, or up to $926/week total); and
3. Unemployment benefits can be paid to individuals who ordinarily may not be eligible for unemployment benefits, such as independent contractors, self-employed individuals, business owners, and those with limited work histories, and who could be able to work in the absence of COVID-19. In addition, workers who quit their job for COVID-19 reasons may qualify for South Carolina unemployment benefits.

For those workers that receive South Carolina unemployment benefit payments, the worker must report and pay South Carolina (and federal) income taxes on these unemployment payments.  The worker can elect to have federal and South Carolina income taxes withheld from his/her unemployment benefit payments.  However, if the worker does not have these taxes withheld, the worker must pay quarterly estimated tax payments to the IRS and the South Carolina Department of Revenue for income taxes due on these payments.

The COVID-19 pandemic has been an extraordinarily difficult time for many.   South Carolina workers receiving state unemployment benefits must remember that these payments are subject to federal and South Carolina income taxes, and the individual is responsible for making these income tax payments, either through withholdings or estimated tax payments.