This commentary is by Michael Hanson-Metayer of South Burlington, an independent who says he does no lobbying and has no direct political affiliation.
Many of the potential effects of the personal information leak created by the 1099-G processing errors are obvious and many people are extremely concerned about the status of their personal information. Rapid resolution of this concern is important and it is a significant issue.
However, one of the biggest tragedies of the 1099-G unemployment insurance payment incident that is so far being overlooked is the unemployment insurance claimants currently left in the dark about their true tax liabilities at a time when a stimulus may still be coming and those people need to use that stimulus resourcefully because of the portion of the Covid-19 crisis that still yet remains.
A lot of the people for whom careful management of the stimulus payment will be most important are the type of people who rely on tax refunds to plan out the upcoming year financially, as well as to catch up on bills and make purchases of durable goods. Some individuals are not as fiscally measured with their tax refund, but for many this is a very important time of year in regard to their financial health.
Many people will end up owing taxes because supplemental unemployment did not have taxes withheld for most individuals (something a lot of people may not be planning for). Knowing that before the stimulus hits accounts may save thousands of Vermonters from financial distress when taxes formally become due (possibly April 15, but who knows with Covid).
The supplemental unemployment insurance payments have been a huge boon to many of the “in between” workers (those above the poverty line but not quite middle class, even though they may make $15-$20 per hour and hold some level of postsecondary education or technical training or even a bachelor’s degree who lost work in 2020), but the realities relating to the delays in being able to calculate tax refunds are still going to squeeze many in this group of workers who saw partial or total unemployment during some period of 2020.
The gravity of the situation is significant and there are many moving parts. However, tax law sets out Jan. 31 as the day to get 1099s out and I personally plan months in advance to be ready to put my taxes together at the very end of January/very beginning of February each year and I do not believe I am alone in this practice.
I do not hold a Ph.D. in economics, nor a master’s in psychology, but there will be an avoidable crisis for thousands of Vermonters who need to understand their 2020 tax burdens and refunds before moving into 2021 finances if the new round of stimulus reaches them before the 1099-Gs do. I am a student of the realities of humanity and there will be many who get the new stimulus payment and use it as a down payment on a car, or spend it to pay off credit cards, or otherwise use it to make a one-time purchase before figuring out their 2020 taxes. This will be exacerbated if the 1099-Gs continue to be delayed.
There will definitely be some people who are used to getting a specific tax refund, and plan on it each year, who will not receive that amount for the 2020 tax year (many of whom have no clue about this fact at this time) and another group of people who cycle back and forth between owing taxes and receiving a refund at tax time from one year to the next who are in the corner biting their nails right now (all on account of taxes not being withheld from the supplemental unemployment payments).
This is a circumstance I foresaw six months ago, but the 1099-G delay complicates it and the pending stimulus compounds the need for a swift resolution, but also may offer a needed balm to many people’s upcoming tax burdens if they can understand those burdens in time. Those people need to know their tax realities in advance of spending the stimulus check or they will be living through a crisis of their own making.
I am not sure how much weight my comments may hold or if they will be considered by many, but I can state with certainty that they reflect the realities of thousands in the state. Is there a solution before this crisis unfolds? Getting the 1099-Gs turned around quickly, and a potential statement on 2020 taxes coming out of the governor’s office before the new round of stimulus hits, may be instrumental in preventing a pending crisis.
Ultimately, there is a lot of individual responsibility to be apportioned at this point in this yearlong crisis, but resiliency will be key over the next year and supporting Vermonters with information now will go a long way toward improving their economic resiliency. Layoffs that are still coming and shifts in employment positions within Vermont to out-of-state locations have not yet fully hit the economy, but will; the rebalance of the economy in the post-Covid era is still coming and will be significant, but will hopefully have future benefits as well as the likely losses.
The governor has taken many actions and instituted several policies over the last year to keep Vermonters as safe as possible during the Covid crisis, and he is to be commended for those efforts, but this new crisis comes at pivotal time and managing it well will impact many in a significant way. Helping needy Vermonters protect themselves financially now, specifically in understanding their tax responsibilities before a federal stimulus check is received, will go a long way toward avoiding a future crisis for those individuals and the communities they reside in.
