Is Unemployment Compensation Taxable?

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The short answer is YES – now continue reading for some important details.

Whether you do (or don’t) have to file a tax return doesn’t have anything to do with if you were (or were not) employed.  It depends entirely on how much income you received during the year.  Thus, those who were unemployed AND earned more than the filing threshold should know that unemployment benefits do qualify as taxable income.  In other words, Uncle Sam will count unemployment payments received as taxable income.

How To Report Unemployment Benefits Received On Your Return
Around late January or early February of the year FOLLOWING the year in which you received your benefits, you should get a Form 1099-G.  Box 1 will contain the amount of benefits you received.  If there were any Federal or State taxes taken out, they will be listed as well.

When you file your return, report your unemployment income on line 19 of Form 1040