If you are receiving unemployment compensation, it’s important to understand how it can affect your taxes. You may still be required to file a tax return even if you are not earning income, and you may qualify for certain tax breaks as well. With a record number of taxpayers receiving unemployment compensation due to COVID-19, we want to address these frequently asked unemployment tax questions.
Do I have to file taxes if I’m unemployed?
This really depends on how much total income you earned during the year. The IRS says you must file if you are under age 65, your status is single, and you received over $12,400 in income. If you are married filing jointly, you’ll need to file if your combined income was greater than $24,800.
If you don’t have any taxable income to report when you file, chances are your return will be rejected by the IRS.
Do I have to pay taxes on unemployment?
Yes, your unemployment compensation is considered taxable income by the IRS (and most states, too). If your total income for the year – including what you get for unemployment – is more than the minimum amount required to file, some of it could be taxed. To make sure you aren’t surprised with a tax bill when you file, you can have taxes withheld from your unemployment income during the year, or you can make estimated payments – it’s your choice.
To have income withheld from your unemployment compensation during the year, fill out Form W-4V, Voluntary Withholding Request. Use the Tax Witholding Estimator to calculate what you’ll need to have withheld.
What do I need to file unemployment taxes?
You should receive Form 1099-G from your state showing the total amount of unemployment income you need to report. If you were employed for any amount of time during the year, you will also need your W-2 from your former employer.