Updated for filing 2021 tax returns
Note: If you received unemployment benefits in 2021, you are required to pay taxes on those benefits. While unemployment benefits were made tax-free for 2020, that tax-free status was not extended to 2021.
If you lose your job or get laid off, you may be able to get unemployment benefits via the U.S. Department of Labor and individual states.
While these benefits usually differ in their unemployment programs depending on the state, all states follow the same federal guidelines.
Who qualifies for unemployment benefits?
Generally, you qualify for unemployment benefits if you:
- Are unemployed through no fault of your own (typically because of a lack of available work)
- Have worked for a certain period of time before becoming unemployed
- Meet any additional requirements for your state
How do I apply for unemployment benefits?
Each state has its own unemployment insurance program, and you can typically apply online, in-person, or over the phone. You’ll also want to apply as soon as possible after becoming unemployed.
You should generally file the unemployment claim in the state where you worked, but if you live in a different state now, check with your resident state to see how to go about the process.
When you file a claim, you’ll want to have info like addresses and dates for former employment to finish the claim process. Once done, it’ll take a few weeks for you to receive your first payment, so make sure you have all the correct info to avoid delays.
Do I owe taxes on unemployment payments?
Yes; unemployment benefits are treated as taxable income, so you will have to pay a percentage towards Social Security and Medicare taxes.
Does my state also tax unemployment income?
Check your state’s revenue agency website for more information, and when you file your taxes, review your state return to ensure it treats unemployment income accordingly.
Will taxes automatically be taken out of my unemployment payments?
Unlike an employer, the IRS doesn’t automatically withhold taxes on unemployment benefits. You may have to pay those taxes on unemployment on a quarterly basis, or you can choose to have federal income tax withheld from unemployment benefits by filing Form W-4V with your state department.
What tax forms should I get for my unemployment benefits?
You should get a Form 1099-G, which shows the amount paid to you and the amount of any taxes withheld. When you do your taxes with 1040.com, our interview will help you find the right screen to fill out.
Can I deduct unemployment benefits that I receive from a union fund?
Union dues are taxable, but if you contribute to a special union fund, you can deduct unemployment benefits up to the amount you contributed to the fund. If your benefits are greater than your contributions, you’ll owe tax on the excess and report it as “Other Income,” not unemployment benefits.
Does unemployment count towards the Earned Income Tax Credit?
While unemployment benefits are taxable, they are not considered earned income, so they don’t qualify for the Earned Income Credit. You have to have received wages sometime during the year to qualify.
Feel good about taxes for unemployment benefits
No matter your situation, 1040.com makes tax filing feel good. With just one flat $25 rate for everything you need, price surprises are a thing of the past, even when you start adding forms for unemployment benefits.
See also: Tax Help After a Layoff