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Unemployment Benefits are TaxableSeptember 8, 2020
With millions of Americans now receiving taxable unemployment compensation, many of them for the first time, the Internal Revenue Service today reminded people receiving unemployment compensation that they can have tax withheld from their benefits now to help avoid owing taxes on this income when they file their federal income tax return next year.
By law, unemployment compensation is taxable and must be reported on a 2020 federal income tax return. Taxable benefits include any of the special unemployment compensation authorized under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, enacted this spring.
- Do I have to report unemployment benefits on my federal income tax return? Yes, any unemployment compensation received during the year must be reported on your federal tax return.
- How will I know how much unemployment compensation I received? If you received unemployment compensation during the year, you should receive Form 1099-G from your state’s unemployment office.
- How will unemployment compensation affect my tax return? If you do not have taxes withheld from your unemployment compensation, it could result you owing taxes.
- Can I have federal income tax withheld from my unemployment compensation? Yes, you can choose to have federal income tax withheld from your unemployment benefits by submitting a Form W-4V, Voluntary Withholding Request, to your state’s unemployment office.
- If I am no longer collecting unemployment benefits, how can I pay the tax due? You can make estimated tax payments here and/or increase your withholding once you have a new job. You can check your estimated withholding using the withholding calculator. More payment options here.