Topic Number: 418 - Unemployment Compensation
The tax treatment of unemployment benefits you receive depends on the type of program paying the benefits. Unemployment compensation includes amounts received under the laws of the United States or of a state, such as:
- State unemployment insurance benefits
- Benefits paid to you by a state or the District of Columbia from the Federal Unemployment Trust Fund
- Railroad unemployment compensation benefits
- Disability benefits paid as a substitute for unemployment compensation
- Trade readjustment allowances under the Trade Act of 1974
- Unemployment assistance under the Disaster Relief and Emergency Assistance Act of 1974, and
- Unemployment assistance under the Airline Deregulation Act of 1978 Program
Unemployment compensation doesn't include:
- Workers' compensation payments; see Publication 525, Taxable and Nontaxable Income, for information on these payments.
- Supplemental unemployment benefits received from a company-financed fund. These benefits are wages subject to income tax withholding and may also be subject to social security and Medicare taxes. They should be reported to you on Form W-2 (PDF), Wage and Tax Statement. See Publication 15-A, Employer’s Supplemental Tax Guide, section 5, for more information about supplemental unemployment benefits.
- Unemployment benefits from a private fund to which you voluntarily contribute. These benefits are taxable only if the amounts you receive are more than your total payments into the fund. However, the taxable amount isn't unemployment compensation. Report it is as "Other income" on line 21 of Form 1040 (PDF).
If you received unemployment compensation during the year, you must include it in gross income. You may be required to make quarterly estimated tax payments. However, you can choose to have federal income tax withheld. For more information, refer to Form W-4V (PDF), Voluntary Withholding Request. You should receive a Form 1099-G (PDF), Certain Government Payments, showing the amount of unemployment compensation paid to you this year in Box 1, and any federal income tax withheld in Box 4. Report the amount shown in Box 1 on line 19 of Form 1040 (PDF), line 13 of Form 1040A (PDF), or line 3 of Form 1040EZ (PDF), and include the withholding shown in Box 4 on line 64 of Form 1040, line 40 of Form 1040A, or line 7 of Form 1040EZ. For more information on unemployment, see Unemployment Benefits in Publication 525.