PSA: Unemployment Benefits Are Taxable; Stimulus Checks Are NOT Taxable!

We’re seeing a lot of confusion out there from people so we thought we’d clear it up for everyone.

The one time stimulus checks that most people received ($1200/adult & $500/child) is NOT taxable. [Note: If you haven’t received it yet, you can check the status of your payment at this link] This was a one time advanced credit that is not taxable and won’t have to be paid back.

However, unemployment benefits that people are receiving now (whether from the state or the $600 Federal) is absolutely taxable. And if you end up collecting unemployment for awhile, you will probably wind up with an unexpected tax bill next year.

At the end of the year, you will receive form 1099-G with your total compensation from unemployment that you’ll have to file with your tax return.

What can you do now?

You can request that the State and Federal withhold taxes from your unemployment benefits each week. Each state website is different but there should be a withholding option on the same page where you click to certify your benefits. For New York for example, you would go to the Unemployment Services page, then to ‘Update Your Personal Information’ and there you’ll be able to elect 10% withholding for Federal and 2.5% for State.