How to pay taxes if you received unemployment benefits

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The tax regime for people who receive unemployment benefits depends on the type of program that pays benefits.

The intricacies of paying taxes by such persons explained US Internal Revenue Service (IRS).

Formally, the concept of "unemployment benefits" includes such amounts received in accordance with US or state law:

• state unemployment insurance benefits;
• benefits paid by the state or the Federal District of Columbia from the Federal Trust Fund for the payment of unemployment benefits;
• payment of unemployment benefits for employees of railways;
• disability benefits paid in lieu of unemployment benefits;
• benefits in connection with the reorganization in accordance with the Commerce Act of 1974;
• unemployment benefits in accordance with the Law on the Elimination of Consequences of Natural Disasters and Emergency Assistance of 1974;
• unemployment benefits in accordance with the program of the Law on the Reduction of State Regulation of Airlines of 1978.

Unemployment benefits do not include:

• payments in compensation of employees injured at work. For information about these payouts, see Publication 525 — Taxable and Nontaxable Income;
• additional unemployment benefits from a fund funded by the company. Benefits of this type are the wage with which income tax is deducted. Payments for additional unemployment benefits are listed on the W-2 Form (Form W-2). For more information on additional unemployment benefits, go to Publication 15-A — Employer's Supplemental Tax Guide;
• unemployment benefits paid from a private fund to which the employee voluntarily contributed. Such benefits are taxable only if the amounts received by the employee exceed the total amount of funds contributed by him to the fund. However, this taxable amount is not formally unemployment benefits. It is declared as “Other income” (Other income) in the 21 line of the 1040 Form (Form 1040).

If during the year you received unemployment benefits, you should include them in your total income. You may be required to pay quarterly settlement tax. However, you can choose to withhold federal income tax. For more information, read on. Form W-4V — Voluntary Withholding Request.

You should also get the 1099-G Form (Form 1099-G), which reflects in field 1 the amount of unemployment benefits paid to you, and in field 4 - any federal taxes withheld from it. The amount included in box 1 appears on line 19 of Form 1040 (Form 1040), the 13 String Forms 1040A (Form 1040A) or the string 3 Forms 1040EZ (Form 1040EZ), and the amount of tax withheld included in the 4 field is indicated in the 64 line of the 1040 Form, the 40 line of the 1040 Form or the 7 line of the 1040EZ Form.

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