Being out of work and filing for unemployment benefits tends to be low on the list of fun and interesting topics to talk about with your friends. It’s no surprise that accurate information about the taxation of unemployment benefits is somewhat hard to come by.
If you find yourself in the position of accepting unemployment benefits, there is no doubt that you have experienced a myriad of emotions and circumstances. However, properly dealing with your finances is important, whether they come from your job or government assistance.
Just how are unemployment benefits taxed?
Believe it or not, unemployment benefits are counted as income and are taxable on your federal tax return. As far as your state tax return, it varies from state to state. Although it’s not the best news, it’s better to know now as you sit down to file your tax return.
There is one variable, however. You may not need to file a federal tax return if your gross income does not meet the federal income limit of $10,150 ($20,300 if
married filing jointly). Also, it is important to note that compensation for unemployment doesn’t include supplemental benefits that come from a fund which is company-financed.
How should unemployment benefits be reported?
If you received unemployment income you will receive a Form 1099 – G that details the amount of income you have received from the government as well as any taxes taken out.
Can I still get a tax refund?
This might be a good spot to remind you that if you request unemployment benefits, you do have the option to have taxes withheld so you won’t owe taxes. Whatever your personal decision may be, it is good to keep in mind that although you may be going through unemployment, there are still ways to keep your head above water.
You may also be eligible for valuable tax deductions and credits to give you you’re maximum tax refund. TurboTax will search for over 350 of them and give you the ones you are eligible for so you can get more money in your pocket.