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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unemployment insurance benefits, unemployment insurance payments, state unemployment insurance, Income Tax, unemployment, unemployment trust fund, taxes, unemployment payments, form 1040aRecommended 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.