Reporting Unemployment

If you lose your job or get laid off, you may be able to get unemployment benefits. The payments may be a welcome relief, but they are taxable and need to be reported on your tax return.

You’ll need to include all unemployment compensation in your income for the year. Include benefits paid to you from regular union dues. But 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.

You should get a Form 1099-G – Certain Government Payments, showing the amount paid to you and the amount of any taxes withheld. When you do your taxes with 1040.com, our interview will help you find the right screen to fill out.

You can choose to have federal income tax withheld from unemployment benefits, to avoid possibly owing when you do your taxes. Use Form W-4V, Voluntary Withholding Request to set up withholding on your benefits through your state unemployment office.

While unemployment benefits are taxable, they are not considered earned income, so they don’t qualify for the Earned Income Tax Credit. You have to have received wages sometime during the year to qualify.