Yes, unless you are filing a 2020 tax return, your unemployment compensation is fully taxable by the federal government.
Where do I report Unemployment Compensation?
Unemployment Compensation is reported:
- Federal Section
- Income
- 1099-G Box 1
- Add or Edit a 1099-G
How do I report Unemployment Compensation that was repaid?
Unemployment received and repaid in same tax year- If you received unemployment income and repaid it in the same year, you can subtract the amount you repaid from the total amount received. You will make that entry in our program by going to:
- Federal Section
- Income
- 1099-G Box 1
- Repayment of Unemployment
Unemployment received in one year and repaid in a later tax year- If the repayment was made in the current tax year for a prior year where the unemployment compensation was claimed as income and it was:
- less than $3,000 enter it here:
- Federal Section
- Deductions
- Itemized Deductions
- Other Itemized Deductions
- Add Additional
- greater than $3,000 it is claimed here:
- Federal Section
- Deductions
- Itemized Deductions
- Other Itemized Deductions
- Repayment under claim of right (if greater than $3000).
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 further information see Publication 525
What is different about tax year 2020?
For tax year 2020, you may qualify to exclude up to $10,200 of your unemployment compensation. Keep in mind this is only available 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. The IRS has indicated that they will automatically review returns that include unemployment compensation to ensure the exclusion has been applied. The IRS will determine the correct taxable amount of unemployment compensation and tax. Any resulting overpayment of tax will be either refunded or applied to other outstanding taxes owed.
You may need to file an amended return if the corrected taxable income allows you to claim credits or deduction not allowed on the original return. For example, if you claimed the Earned Income Credit but now qualify for a larger credit based on the income, the IRS will adjust the refund to reflect the larger credit. However, if you did not qualify for the credit on the original return due to the income and you do now, you will need to file an amended return.
If the IRS adjusts your return for the unemployment exclusion, they will send you a refund. The first refunds are expected to be made in May and will continue into the summer.
If you received any unemployment compensation you will typically receive Form 1099-G, with income reported in box 1.