Yes. However, for tax year 2020, you may qualify to exclude the first $10,200 of unemployment benefits.
For tax year 2020:
The first $10,200 of unemployment income can be excluded from your federal income. If married filing jointly and both spouses received unemployment, the amount increases to $20,400. The AGI must be less than $150,000 for both single and joint filers.
If the taxpayer has already filed for 2020, they will be affected. At this time, the IRS is still determining how the adjustment will be handled. The IRS does not expect returns that have already been filed to be paused or interrupted by this change.
How do I report my unemployment compensation?
You must include all unemployment compensation received in the income you report on your taxes each year. If you qualify for the exclusion, it will be automatically applied based on your entries.
You should receive a Form 1099-G, and the total unemployment paid to you will show in box 1. Make the entry in the program:
- Federal Section
- Unemployment Compensation
- 1099-G Box 1
You may choose to have federal income tax withheld from your unemployment by completing Form W-4V, Voluntary Withholding Request and submitting it to your unemployment office. The taxes will be withheld at 10% of your payment. Additional state taxes may be necessary depending on where you live, so you should check with your individual state.
For more information, see our Unemployment Compensation article.