Topic no. 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
• Benefits from a private fund if you voluntarily gave money to the fund and you get more money than what you gave to the fund.

If you received unemployment compensation during the year, you must include it in gross income. To determine if your unemployment compensation is taxable, see Are payments I receive for being unemployed taxable?

How to pay taxes for unemployment compensation

If you received unemployment compensation, you:

• Can choose to have federal income tax withheld from your unemployment compensation. Refer to Form W-4V, Voluntary Withholding Request and Tax Withholding; or
• May be required to make quarterly estimated tax payments

Reporting unemployment compensation

You should receive a Form 1099-G, Certain Government Payments, showing the amount of unemployment compensation paid to you during the year in Box 1, and any federal income tax withheld in Box 4. Report the amount shown in Box 1 on line 7 of Schedule 1, (Form 1040), Additional Income and Adjustments to Income PDF and attach this to the Form 1040 or Form 1040-SR. Include the withholding shown in Box 4 on line 25b of Form 1040 or Form 1040-SR. For more information on unemployment, see Unemployment Benefits in Publication 525.

Unemployment fraud

Criminals use stolen identities to file claims for unemployment compensation in other people's names. State unemployment agencies submit Forms 1099-G to individuals in whose names and Social Security numbers the unemployment compensation was paid and to the IRS. Victims of fraud who receive Forms 1099-G with inaccurate amounts of unemployment compensation in Box 1 should notify the state agencies of the inaccuracies and request corrected Forms 1099-G. The Department of Labor details how to report fraud and protect yourself. The IRS offers tax guidance to victims at Identity Theft and Unemployment Benefits.