Federal Income Tax
Although the State of New Jersey does not tax unemployment benefits, they are subject to federal income taxes and to the federal rules that apply to the reporting of income and payment of taxes. Following the end of each calendar year, the New Jersey Department of Labor and Workforce Development will provide you with a statement (Form 1099-G) of the total amount of benefits you received during the year. This information will also be given to the Internal Revenue Service (IRS).
In accordance with the provisions of the Internal Revenue Code, you must pay most of your tax liability through tax withholding and/or the quarterly filing of estimated tax payments. The IRS may impose penalties if you do not pay enough tax using one or both of these methods each calendar
quarter. To help offset future tax liabilities, you may voluntarily choose to have 10% of your weekly unemployment benefits withheld and forwarded to the Internal Revenue Service.
At the time you file your unemployment claim, you will be asked if you wish to have federal income tax withheld from your weekly unemployment benefits. If you decide to have federal income tax withheld but later change your mind, be advised that taxes already withheld cannot be returned to you except by the federal government as part of your federal income tax refund.
You may select or change your withholding status at any time by writing to the New Jersey Department of Labor and Workforce Development, Unemployment Insurance, PO Box 908, Trenton, NJ 08625-0908. Click here for the "Request for Change in Withholding Status" form.