Paying Taxes On Income From Unemployment Insurance

Updated : June 12th, 2019

As most of you reading this would be aware, voluntarily unemployed citizens in the U.S are eligible for a weekly monetary compensation for up to 26 weeks from the system that is jointly run by the state-federal setup, commonly known as Unemployment Compensation or Unemployment Insurance. Ascertained on your income in the preceding 5 calendar quarters, the weekly compensation is largely a part of your highest earnings in a particular quarter and disbursed to help you manage basics of life until you find a job and start your regular earnings again.

As a part of our ongoing educational series aimed at helping you understand the basics of Unemployment, we intend to cover one of the most common concerns of the claimants, the implication of tax on the unemployment compensation received from the state.

Is Unemployment Insurance Taxable?

Perhaps, one of the most commonly searched keywords on various online search engines that includes Google. The bottom line, Unemployment Compensation is considered as taxable income since it has a monetary face to it.  It not only includes the regular state-provided benefits but also federal or state-initiated extended benefits(subject to availability). Therefore, if you’re a recipient of the dole, you should be looking forward to paying taxes on the options below.

  • Withholding Income Tax From Unemployment Compensation
  • Reporting The Income When You File State/Federal Tax Returns

Let’s throw more light on each of the options above with a view to understanding how they work.

Filing Tax Returns

Withholding Tax From Unemployment Insurance Before Disbursal

As a recipient of weekly unemployment benefits from the system, if you want to save yourself from the hassles of including unemployment income when you file for the previous assessment year, you can choose to have it taxed at the source before it credits your bank account. This is similar to withholding payroll taxes from your salary from former paychecks. If you wish to have the applicable taxes withheld, submit form W-4V to the unemployment office to receive monies after tax deduction.

Reporting Unemployment Income At The Time of Filing

At the time of filing annual tax returns, you would also need to include income from unemployment in the ambit. For this purpose, the state where your compensation originates will provide Form 1099-G, which is a detailed statement that depicts the total compensation received during a specific period. This form can be used as an authentic paperwork to show the earnings from the system while being unemployed. Do read more the income tax related laws in your state to understand the tax slabs and other breakup associated with it. Some states make it mandatory to pay an estimated tax on a quarterly basis for the compensation received.

If you choose not to do any of the above to report your earnings from unemployment to the IRS, you may be penalized on the basis of the underpaid amount for each quarter as per the provisions.

Tax Implication on Supplemental Unemployment Benefits

While we underlined some key aspects of tax implication on income from unemployment insurance directly from the state, the points below will highlight taxes on compensation received from other sources.

  • People who receive supplemental unemployment benefits from funds promulgated by the employer are not considered since they are taxable under various other sections and should be reported on Form W-2(Wage & Tax Statement).
  • Unemployment benefits from private funds where voluntary contribution is made is taxable only if the total compensation received exceeds total payments made by the recipient into the fund.

How Do I Get A Copy of 1099-G?

By default, all states are required to provide a copy of the 1099-G for your reference either at the end of the compensation period or as per the prescribed timelines that act like a consolidated statement to help you file for tax returns. Depending on the state where your claim is based, you will receive the statement either by post or by via email. Some states even let you download this form from their official website after verifying personal credentials.

If you’ve not received the 1099-G as per the timelines, call the claims center of the Unemployment Office in your state for further details.  

If you have any further questions pertaining to payment of taxes towards income from unemployment compensation, get in touch with us by using accessing the Q & A section, link to which is provided below.

    1. Jose,

      We’re not a scam or a fraud website:) has been around for more than 10 years and we’re one of the leading forums for unemployment insurance and unemployment in general. Our daily visitor and patron base is of considerable size and we truly believe in being a center for jobless workers to access resources and share their queries.

  1. I’m attemptiing to file my first weekly claim since my layoff, however, my PIN# is not correct. what do I do to get my correct PIN# , please?

  2. I have exhausted my unemployment benefits in Texas but my calendar year does not end until September. Do I have to wait until the calendar year is over in Texas, to apply for unemployment benefits in New York in which I have available quarters?

    1. Mattie,

      As much as I am aware, UI benefits are only a one-time cycle. Please call the Claims Center for clarification.

  3. Help ran out of unemployment benefits for the pass 8 years i have worked at Hexion speciality chemical plant in Brady Texas how can i get my benefits extended

    1. Roderick,

      The E.U.C(Emergency Unemployment Compensation) remains expired. There is no extension available. Please inquire further with the labor authorities in your state by calling them.

    1. Annette,

      You can visit the official website of the Unemployment Office and ‘login’ to check the claim status. Alternatively, you can also call the Claims Center.

      PS: It should not take 6 weeks to process the initial claim. Please chase at regular intervals.

    1. Jocelyn,

      Unemployment is offered to claimants who’re able and available for work. Please call the Unemployment Office to ascertain if you can apply.

  4. I have been working for the same company for the past 11 years. I started out cleaning apartments, then landscaping and finally Asst. Manager for the past seven years. However, the owner/ manager had us all sign papers claiming we were “Independent Contractors.” I worked Monday thru Friday from 8am – 5pm the entire 11 years. Obviously, in reality, we had Never been “Independent Contractors.”
    Finally, October 2018 we became employee’s. On May 10, 2019 he sold the business which puts us all out of work. I tried filing for unemployment, but, I don’t have enough quarters in. Assuming I’m still out of work, can I wait for the next quarter to end, thus giving me the 2 quarters I need or will it not make a difference.

    1. Lea,

      Why don’t you look at alternate based period? Please use the link below to access the Base Period calculator.

  5. I have been working as an hourly employee for the last 4 months. Currently the board of the nonprofit agency came to me and told me that I had to file a 1099 or go to part time or find a new job. I have a scheduled time that I report to work. What are the laws here in Florida about who can receive a 1099

  6. I am unemployed and currently going to a community college. How can I apply for federal assistance?

    1. Carol,

      If you’re able and available for full-time employment, you can directly go to the website of the Unemployment Office and apply.

  7. I have worked in AZ since March 2016. However, I moved lived and worked for my employer in CA since 08/02/1982. Can I apply for Cali unemployment benefits?

    1. Robert,

      You should be applying from the state where your employment was based. Employers generally remit unemployment taxes to the state where the employee is based.

      1. How long does it take Washington state unemployment to deposit your back pay after they receive the determination letter from OAH stating I won my appeal?

  8. I have been trying for over a month to file and I still do not seem to be able to do it, but I finally got to the correct place, I think.

  9. Cumberland NJ Unemployment Center kept me on hold for 2 hours; I finally had someone answer my call, after providing my information and question regarding the status of my NJ Unemployment Claim the representative disconnected my call.

  10. Excellent list of things to help execute better. Even taking 3 or 4 of these that one does not currently utilize could help immensely.

    1. How did you calculate the total weekly Illinois benefit of $1495? Also, why isn’t Washington and Minnesota listed in your top 5 states with the highest paid unemployment insurance compensation?

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