ANSWERS: 1
  • Unemployment insurance benefits are considered income by the Internal Revenue Service, so you are required to pay income taxes on any benefits you receive. Fortunately, calculating the taxes owed on your unemployment benefits is a simple matter. Most taxpayers can complete all the forms required in one sitting provided they don't have income other than traditional wages and unemployment benefits.

    Gather Your Documents

    Determine which income tax form you will need to file. Most taxpayers who have received unemployment insurance benefits over the course of the year will be eligible to use the form 1040EZ. If you had income other than wage or benefits income you may be required to file using the standard form 1040. You will receive a W-2 form in the mail from each of the employers you worked for during the last year. You will also receive a form 1099G from the Employment Department stating the total unemployment insurance benefits you have received during the year.

    Complete Your Tax Return

    Enter your total income from your W-2's on line 1 if you are using 1040EZ or on line 7 if you are using form 1040. Enter your total unemployment insurance benefits in excess of $2,400--from box 1 on form 1099G--on line 3 of form 1040EZ or on line 19 of form 1040. Complete the remaining portions of your tax return. Attach the appropriate copies of form 1099G and your W-2's to your completed tax return form.

    Avoiding a Lump Sum Tax Bill

    When you file for unemployment insurance benefits, you can request that the federal government withhold income tax from your benefits payments. Allowing your taxes to be withheld will protect you from having to pay a lump sum to the IRS when you file your taxes and could result in a refund check.

    Source:

    IRS form 1099G

    IRS form 1040EZ

    IRS Form 1040

    More Information:

    IRS form 1040 Instructions

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