Five Facts about Unemployment Benefits
If you lose your job or your employer lays you off, you may be able to get unemployment benefits. The payments may be a welcomed relief. But you should know that they’re taxable.
Here are five important facts about unemployment compensation:
1. You must include all unemployment compensation in your income for the year. You should receive a Form 1099-G, Certain Government Payments. It will show the amount paid to you and the amount of any federal income taxes withheld.
2. There are several types of unemployment compensation. They generally include any amount received under an unemployment compensation law of the U.S. or a state.
3. You must include benefits paid to you from regular union dues in your income. Different rules may apply if you contribute to a special union fund and those contributions are not deductible. In that case, only include as income any amount you get that is more than the contributions you made.
4. You can choose to have federal income tax withheld from your unemployment. You make this choice using Form W-4V, Voluntary Withholding Request. If you do not choose to have tax withheld, you may have to make estimated tax payments during the year.
5. If you are facing financial difficulties, there may be tax benefits available. For example, if your income decreased, you may be eligible for some tax credits, such as the Earned Income Tax Credit. If you owe federal taxes and can’t pay your bill, there may be steps to take that can help ease your financial burden.
For more details, call our office for an appointment. We can discuss any available options you may have.