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Five Facts about Unemployment Benefits

3/5/2014

 
If you lose your job or your employer lays you off, you may be able to get unemployment benefits.  The payments may be a welcomed relief.  But you should know that they’re taxable.

Here are five important facts from the IRS about unemployment compensation:

1.  Unemployment is taxable.  You must include all unemployment compensation in your income for the year.  You should receive a Form 1099-G, Certain Government Payments.  It will show the amount paid to you and the amount of any federal income taxes withheld.

2. Paid under U.S. or state law.  There are several types of unemployment compensation. They generally include any amount received under an unemployment compensation law of the U.S. or a state.  For more about the various types, see Publication 525, Taxable and Nontaxable Income.

3.  Union benefits may be taxable.  You must include benefits paid to you from regular union dues in your income.  Different rules may apply if you contribute to a special union fund and those contributions are not deductible.  In that case, only include as income any amount you get that is more than the contributions you made.

4.  You may have tax withheld.  You can choose to have federal income tax withheld from your unemployment.  You make this choice using Form W-4V, Voluntary Withholding Request.  If you do not choose to have tax withheld, you may have to make estimated tax payments during the year.

5.  Possible tax credits.  If you are facing financial difficulties, you should visit IRS.gov. “What Ifs” for Struggling Taxpayers explains the tax effect of events such as the loss of a job.  For example, if your income decreased, you may be eligible for some tax credits, such as the Earned Income Tax Credit.  If you owe federal taxes and can’t pay your bill, contact the IRS as soon as possible.  In many cases, the IRS can take steps to help ease your financial burden.

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  • Home
  • About
    • Book An Appointment
  • Accounting
    • Dashboard
    • Xero+Accountency
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    • QuickBooks >
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    • Store
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    • Dashboard
    • Individuals
    • Businesses
    • Tax Stuff >
      • Individuals >
        • Income >
          • Debt Forgiveness
          • Foreign Income
          • Gambling Income
          • Unemployment
          • Other Income
        • Deductions & Credits >
          • Adoption
          • Charitable Contributions
          • Earned Income Tax Credit
          • Educational Expenses
          • Energy Tax Credits
          • Employee Business Expenses
          • Other Deductions and Credits
        • Affordable Care Act - Individuals
        • Children and Dependents
        • Death
        • Disabled Taxpayers
        • Educators
        • Health Care
        • Identify Theft
        • Marriage and Divorce
        • Military
        • Real Estate
        • Retirement Savings
        • Seniors
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        • Record Keeping
        • Who Must File
        • Other Topics
      • Businesses >
        • Affordable Care Act - Businesses
        • Year-end Reporting Obligations >
          • 1099's
          • Health Insurance Premiums
          • Depreciation
          • Reimbursed Employee Business Expenses
          • Company Automobiles
        • Employment Tax Credits
        • Independent Contractors
        • Tax Credits and Deductions for Businesses
        • Other Business Topics
        • Required Business Posters
      • Amended Returns
      • IRS Notices and Problems
      • Tax Plan >
        • All About the Earned Income Tax Credit
        • 5 IRS Audit Red Flags
        • Retirement Plans for Sole Proprietors
        • Are You Claiming All of Your Tax-Deductable Business Expenses for 2015?
        • All About Past Due Tax Returns
        • Do You Need to File Form 1099s?
        • How to File an Appeal with the IRS
        • Why You Might Get a Letter from the IRS, and What to Do
        • How to File an Amended Tax Return
        • Should You Claim the Home Office Deduction?
        • How to Avoid -- And Deal with -- Identify Theft
        • Q & A: IRS Audits
        • Are You Using the Right Business Structure?
        • Starting Planning for 2015 Income Taxes Now: 5 Tips
        • What You Need to Know About Estimated Taxes
        • Contractor or Employee? How the Income Tax Obligations Differ
        • The New Form 1095-A: Reporting Health Insurance Coverage
        • Are Your Social Security Payments Taxable?
        • Do You Qualify for the Earned Income Tax Credit?
        • Are You Eligible for Health Insurance Tax Credits
        • Employee Retirement Plans - Tax Advantages and Other Benefits
        • 5 Business Tax Credits You May Be Missing
        • New Business in 2012
        • Is it a Bad Debt or a Simple Revenue Loss? Telling the Difference
        • Business Taxes Add Complexity: How Will This Affect You?
      • Tax Scams