Do You Have to Pay Taxes On Unemployment Income?
The U.S. unemployment rate continues to remain high at 9.1%. This means that many Americans are collecting their unemployment insurance payments, and many are doing so for the first time ever. Now that the tax season is here, some people are left wondering if unemployment payments are taxable or not. I had the same question when I worked on my father’s tax returns last year. The short answer is yes, unemployment income is taxable. Since unemployment income is treated as normal income, the amount is taxable.
Here’s an excerpt form the Internal Revenue Service web site:
Unemployment compensation is includible in gross income. You must report unemployment compensation on line 19 of Form 1040, line 13 of Form 1040A, or line 3 of Form 1040EZ.
Unemployment compensation generally includes any amounts received under the unemployment compensation laws of
the United States or of a state. It includes state unemployment insurance benefits and benefits paid to you by a state or the District of Columbia from the Federal Unemployment Trust Fund…
If you received unemployment compensation during the year, you should receive Form 1099-G (PDF) showing the amount you were paid. Any unemployment compensation received during the year must be included in your income, unless you contributed to the fund…
If you are in the process of filing your tax returns and are wondering if you have to pay taxes on unemployment compensation, I hope this clears it up.
What to Do if You Can’t Afford to Pay
Update for 2010-2011: According to the IRS web site (information updated on December 09, 2010), unemployment compensation is includible in gross income — meaning it is taxable.Source: www.moolanomy.com