Unemployment Income and State Tax Returns
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Unemployment compensation is taxable income which needs to be reported by filing an income tax return. You should receive a 1099-G reporting the unemployment compensation you received during the year to be reported on your income tax return via Form 1040. Enter the figures from your form on the eFile platform and the Tax App will calculate the taxes owed on it based on your entries - start free.
How to Report Unemployment Compensation
After enrolling in and receiving unemployment benefits during the year, you may have withheld federal and potential state tax based on how your state taxes unemployment income. The map below shows which states tax or don't tax unemployment income. When you prepare your return on eFile.com, you can enter your unemployment information from Form 1099-G and the eFile platform will report it on your return and generate a state return if you state taxes this income. Unemployment income is generally reported on Schedule 1 and again on the federal Form 1040 - eFileIT these forms. When you add your state figures from your statement tax forms, the state forms are automatically generated with your unemployment income and other tax information.
See also: Which states tax retirement income?
You may owe additional tax if you did not withhold enough on your unemployment income or you may be owed a tax refund if you withheld too much for both federal and state. Refer to the table below on whether your state taxes unemployment income or not.
For your W-2 income from employment, you may be familiar with withholding via Form W-4. If you are not tax balanced - you may receive a large refund or may owe a lot of tax at the end of the year - use the free eFile.com W-4 tools and TAXercise your paycheck now. When you file your taxes for a year you received both unemployment income and income from work (from an employer, self-employment, etc.), then you need to add all of this income to one return for the tax year.
States, Taxes, and Unemployment Income
Unemployment benefits are subject to IRS income taxes. The table below shows state income taxes and unemployment organized by the following:
Weeks: The maximum number of weeks the state will pay unemployment benefits within a tax year.
Benefit: The maximum dollar amount per week paid by the state in unemployment benefits.
Max.: The maximum dollar amount per tax year paid by the state in unemployment benefits.
State Taxes: Indicates if the unemployment benefits are subject to state income taxes for the given tax year.
Unemployment income or benefits have gone through extensive regulatory changes during the last years. Not only was the enhanced unemployment benefits period extended, the rules on unemployment income taxation also changed as a result of the American Rescue Plan Act (ARPA) or stimulus three legislation of March 14, 2021. These enhanced benefits have been part of different programs called the Pandemic Unemployment Assistance, Pandemic Emergency Unemployment Compensation, and Federal Pandemic Unemployment Compensation. Unemployment benefit payments were extended from September 6, 2020 to March 14, 2021, and then until September 6, 2021, which adds up to approximately 53 weeks. The unemployment benefits have increased by $300 per week as a result of the December 2020 second stimulus payment package.
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