Yes. You must include all unemployment compensation received in the income you report on your taxes each year.
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
- Income
- 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.