Tax Tips on Unemployment Benefits

Taxpayers who received unemployment benefits need to remember that it may be taxable. Here are some key facts about unemployment:
Unemployment is taxable. and include all unemployment compensation as income for the year. Taxpayers should receive a Form 1099-G, Certain Government Payments, by Jan. 31. This form shows the amount received and the amount of any federal income tax withheld.

Different types of unemployment compensation includes amounts paid under federal law or state law as well as railroad, trade readjustment and airline deregulation laws. Even some forms of disability payments can count.

Benefits received from regular union dues as income might be taxable. Other rules may apply if a taxpayer contributed to a special union fund and those contributions to the fund are not deductible. In this case, report only income exceeding the amount of contributions made.

Tax may be withheld. Those who receive unemployment can choose to have federal income tax withheld by using Form W-4V, Voluntary Withholding Request. Those choosing not to have tax withheld may need to make estimated tax payments during the year.

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