December 3, 2020 You may be among the millions of people who received or are receiving unemployment compensation due to the coronavirus pandemic. By law, these benefits are taxable and must be reported on your federal income tax return. If you received unemployment compensation, you should receive a Form 1099-G showing the amount you were paid and any federal income tax you elected to have withheld. Some states don't mail this form. If you don't receive one by mail, go to your state's website and download the electronic version. Federal law allows you to choose a flat 10% withholding from these benefits to cover part or all your federal income tax liability. If you didn't choose voluntary withholding, or make quarterly estimated tax payments you may get an unexpected tax bill.