With over 30 million American’s losing their jobs due to COVID-19, many are now receiving unemployment benefits, thankfully! Part of the Federal government relief for this pandemic is the extra $600 per week that a person gets while on unemployment. Some of you may be wondering if your unemployment income will be taxable.
Yes, your unemployment income is taxable. There should be a default Federal tax withholding of 10% coming out of your unemployment income, but for many people, this is less than what your employer normally withholds from your pay. This could mean that you’ll end up having to pay some extra taxes next April, which would not be a nice surprise for anyone. In addition, your state will also tax your unemployment income. Unfortunately , there is not a way to withhold state taxes from unemployment benefits.
At the beginning of next year you will get a tax form sent to you called a 1099-G that will show how much unemployment income you received during the year. (This is the same form you get after you get a state tax refund, which seems crazy to me. You get a refund of some of the state taxes that you paid, and then they tax you on again it like it’s new income. Ugh!) You will enter this 1099-G income on your tax return, along with any other wages or income you received during the year.
If you want to make sure that you don’t end up with a surprise tax bill in April, you can elect to have more withheld from your unemployment income now. You would do this by filling out a W-4V form, which you can get RIGHT HERE or by visiting the IRS website. This form will also let you elect to NOT have any taxes taken out of your unemployment checks if you want to.
Please consult a tax professional to help you decide how much to withhold in taxes.