Important: Unemployment Benefits Are Taxable & Many States Won’t Mail You Your 1099-G Form Needed For Your Tax Return!

Update 03/05: Next Covid Bill would provide a tax waiver on the first $10,200 in unemployment income. Has to pass the House & Senate. This only applies to Federal tax.


The federally funded weekly unemployment payments as well as the state unemployment insurance benefits, are taxable at the federal level (IRS). Most states tax unemployment benefits as well. Of the 40 states that tax income, only five — California, New Jersey, Oregon, Pennsylvania and Virginia — fully exempt unemployment benefits from state taxes. Indiana and Wisconsin make partial exemptions. In the remaining 33 states, unemployment benefits are fully taxable at the state level and in all 50 states its taxable at the federal level.

Early this year, Form 1099-G will be available which will tell you the amount of unemployment benefits you received in 2020, and how much was withheld for taxes. You’ll have to report that income on your 2020 federal tax return (and state return, if applicable).

Important: Many states won’t mail out the 1099-G form needed for you to file your tax return! You’ll have to login to where you certify each week to get your 1099-G form.

New York Residents can find the instructions here

For state by state info, click here.

As an aside, the stimulus checks that most people received are NOT taxable but you will have to enter how much you received on your tax return. [Note: If you haven’t received it yet, you can check the status of your payment at this link.] Alternatively, you can wait and claim the stimulus credit when you file your 2020 tax return.

[Source: IRS, AARP and Kiplinger]

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