Some unemployment benefits are taxable
Posted on April 3, 2017
Taxpayers who received unemployment benefits often mistakenly believe those benefits are not taxable. Like so much having to do with taxable income, whether you pay taxes on your income depends on what type of income it is.
At Teipen Selanders Poynter & Ayres, we want you to have as few surprises during tax preparation season as possible. So if you or your spouse received unemployment benefits in 2016, here’s what you should know:
- In general, unemployment compensation benefits are taxable. As such, you must report all those benefits as a part of your total income for the year using Form 1099-G, Certain Government Payments. This form will show the amount received and the amount of any federal income tax withheld.
- Tax can be withheld from your unemployment checks. Those who receive unemployment can choose to have federal income tax withheld by using Form W-4V, Voluntary Withholding Request. If you choose not to have tax withheld, you may need to make estimated tax payments during the year.
- There are different types of unemployment. Unemployment compensation includes amounts paid under federal law or state law as well as railroad, trade readjustment and airline deregulation laws.
- Taxpayers facing financial difficulties can also visit the IRS.gov page called “What Ifs” for Struggling Taxpayers which includes information on tax effects of various life events, including job loss.
If this information seems puzzling, let’s set up an appointment to discuss your particular situation.
The CPAs at TSPA know how to use the various IRS systems which are in place to help the unemployed. We would be happy to assist you in setting up a payment plan through the IRS, or discuss your other options.
How can we be of service to you? Call or email us at Teipen Selanders Poynter & Ayres and let’s get started.