Do You Have To Pay Taxes On Unemployment Income?
Today the U.S. unemployment rate jumps to 8.1% with another 651,000 jobs disappeared in February. The unemployment rate is higher now than at any time since December 1983. This means that many Americans are collecting their unemployment insurance payments, and some are doing so for the first time ever.
As a result, some people are left wondering if unemployment payments are taxable or not. I had the same question when I worked on my father’s tax returns last year. The short answer is yes, unemployment income is taxable. Since unemployment income is treated as normal income, the amount is taxable.
Here’s an excerpt form the Internal Revenue Service web site:
Unemployment compensation is includible in gross income. You must report unemployment compensation on line 19 of Form 1040, line 13 of Form 1040A, or line 3 of Form 1040EZ.
Unemployment compensation generally includes any amounts received under the unemployment compensation laws of the United States or of a state. It includes state unemployment insurance benefits and benefits paid to you by a state or the District of Columbia from the Federal Unemployment Trust Fund…
If you received unemployment compensation during the year, you should receive Form 1099-G (PDF) showing the amount you were paid. Any unemployment compensation received during the year must be included in your income, unless you contributed to the fund…
If you are in the process of filing your tax returns and are wondering if you have to pay taxes on unemployment compensation, I hope this clears it up.
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state unemployment insurance, unemployment insurance payments, unemployment payments, unemployment insurance benefits, unemployment trust fund, taxesRecommended articles
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In Michigan they have allowed the suspension of federal and state withholding on unemployment insurance benefit checks to help provide more cash flow to the unemployed.
Pinyo – A further clarification. The spendulus bill of 2009 exempts the first $2400 of 2009 unemployment compensation from federal income tax.
I find it amusing that the government gives you money which you then have to send back to them…
Mr. GoTo I didn’t know this. Thanks for sharing the info.
@RateNerd and Mr. GoTo – I didn’t know about these. Thank you for the update.
Do you have to pay FICA and medicare taxes on unemployment income?
@JamesP – You should check with a tax advisor. Based on my research,unemployment benefits are not subject to FICA (i.e., Social Security and Medicare). You only have to pay income tax.
FYI!!!!
The statement about Michigan suspending federal and state withholding on unemployment is incorrect. The suspension applies on the STATE level only. You will still have to pay taxes on the Federal part.
If I live in South Carolina but collect unemployment from Florida due to prior jobs in 2008 do I pay any Non resident state tax or just Federal and South Carolina State Tax? Any help would be appreciated.
STOP TAXING UNEMPLOYMENT BENEFITS! – To File Or Not To FILE?
Let’s not forget about those who have lost a job in 2009 and remember the US Congress can still help in 2010 with this new bill IN THE WORKS.
Have you heard about the Jobless STUB Retro 2009 U/B Tax Free Act? STUB is like a paycheck stub and stands for STOP TAXING UNEMPLOYMENT BENEFITS. This bill is seeking critical AFL-CIO support and needs media coverage to garner passage. The new legislative reform bill will make all unemployment collected in 2009 tax free not just the current law deduction of an insane $2400 exemption ( about 6 checks). Many should consider waiting before filing to see if this bill passes because maybe most of their income is from unemployment compensation. Besides you have until April 15 2010 to make a decision. Especially if they did not withhold from their checks and they are long term (5.8 million are) then more than likely they have a IRS liability and will face collection.
The launch site is called Unemployment Gone Mad and you can check for legislative updates. The bill is a big changer if you drew a lot of benefits. Remember a record 20 million collected some unemployment in 2009. This a big life changer for those millions who will face the IRS music. Carl Larson Executive Director at Unemployment Gone Mad: http://unemployment-gone-mad.com …stay tuned for updates
Sandy Levin, Ways and Means Committee New Chairman
How to help the unemployed NOW?
Stop Taxing Unemployment Benefits!
So does it make any sense in 2010 to keep the tax man’s hammer down on the unemployed? Did the government not give the banks a break who created this economic mess in the first place? Did the government’s bail out money not provide profit, survival and fat bonuses for the Wall Street crews? Does the government not plan tax breaks for small business who reinvest in plant, equipment and rehires? Did the government not give big auto a Cash for Clunkers program to boost sales along with financial restructure for GM? Is there not a 8,000 dollar tax credit for first time home buyers who are fortunate to have jobs? So why is there no mention of 100% tax free unemployment compensation for the down trodden, displace and forgotten, we the unemployed.
Is it because we the unemployed have no voice? At the Unemployment Gone Mad community http://unemployment-gone-mad.com we are seeking to change this injustice with a new tax reform bill and one voice. The bill is called the “Jobless STUB Retro 2009 U/B Tax Free Act”? STUB, is like the paycheck stub we no longer have and stands for STOP TAXING UNEMPLOYMENT BENEFITS. The new legislative bill needs Sandy Levin, Ways and Means Committee New Chairman to step up and committee members to climb on board. This bill will make all unemployment collected in 2009 totally tax free.