Monday, April 29, 2013

Frequently Asked Questions About Unemployment Benefits

Despite the fact that unemployment rates are currently at their lowest level since December 2008, they still remained relatively high as of February 2013, when the U.S. Bureau of Labor Statistics reported that unemployment hovered around 7.7 percent. That same report explained that the number of long-term unemployed (those jobless for 27 weeks or more) remained at 4.8 million, making up 40.2 percent of the total unemployed. Given those statistics, it shouldn’t come as a surprise that many questions brought to us are associated with unemployment compensation. Below we try to shed light on some of the more common questions we hear.

Are unemployment benefits taxable? 
Yes, unemployment benefits are taxable. All money received in the form of unemployment benefits must be reported on your tax returns.

How do I know how much to report? 
You will receive Form 1099-G, Certain Government Payments, which will show all income received as well as any federal taxes that were withheld.

Can I have taxes automatically withheld from my unemployment benefits?
Yes, you can. Form W-4V, Voluntary Withholding Request allows you to request that 10% of your payments be automatically withheld.  Simply complete the form and submit it to the office where your payments originate. 

What if I choose not to have taxes withheld?
You may be required to make estimated payments during the year if you choose to not have taxes withheld.

What about payments from my union?
Under normal circumstances, payments from a union for unemployment must be reported on your tax return, as they are taxable. That said, if you contribute to a special union fund, and your contributions are not deductible, you only need to report payments made to you that were in excess of the contributions you paid in.

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