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How to Report Your Unemployment Income



The COVID-19 pandemic caused many Americans to lose their jobs and enroll in unemployment. If you received unemployment benefits due to a job loss, it’s essential to be aware of how this income impacts your taxes. Since unemployment benefits are still considered income—even though they are provided to unemployed workers—they are still considered taxable. If you are receiving unemployment, the best way to avoid being stuck with a large, burdensome tax bill is to educate yourself on reporting unemployment income. Here are some helpful tips on how to report your unemployment income.


Unemployment Income Is Taxable

As previously mentioned, unemployment income is still considered income under federal law and therefore, is subject to taxes. And although the pandemic has presented unprecedented circumstances for many American workers, the IRS is still requiring individuals to report any unemployment compensation.


Considerations Before Reporting Unemployment Income

You must report any unemployment income you received on your 2020 tax return. To get started, you’ll need to know specific information regarding how you received your unemployment income.

First, look to see if you enrolled in voluntary withholding. To participate in voluntary withholding, you must fill out Form W-4V, which automatically withholds 10 percent of your unemployment benefits. This means that Individuals who participated in voluntary withholding have already paid 10 percent of their unemployment income taxes. Alternatively, if you didn’t enroll in voluntary withholding you will most likely have to pay a lump sum in income taxes. If you don’t have the money to pay your taxes, the IRS offers payment plans.


Reporting Your Unemployment Income

If you received unemployment benefits, you’ll receive Form 10-99-G, which is issued by your state’s unemployment office. This form will tell you how much money you received in unemployment income. If you participated in voluntary withholding, the amount of tax you’ve already paid will be included in this form. Keep a record of this form and be sure that it matches your own records. The amount of unemployment income outlined in Form 10-99-G can then be reported in Schedule 1 of your federal tax return. This total is then carried to Form 1040.

Unfortunately, there aren’t many COVID-19 tax exemptions for unemployment. Currently, the IRS is still requiring all individuals who receive unemployment income to pay taxes on both the state and federal levels.

What to Do if You Can’t Pay Your Unemployment Tax Bill

Many Americans who have received unemployment income find themselves in a situation where they are unable to pay their tax bill. If this is your situation, it’s important to take hold of the situation. Even though it may feel overwhelming and stressful, it’s crucial to file your return—even if you can’t pay the bill. If you miss the deadline, you can face additional penalties and fees.


Instead of ignoring your return, call the IRS to discuss your payment options. The IRS provides a variety of relief options to individuals who can’t pay their taxes, such as installment agreements, extensions, or temporary collection delays. If you do not want to deal with the IRS on your own, a skilled tax professional can be a great resource for entering the best payment plan for your situation.


Choose Morgan Sebastian for Help With Your Taxes

If you received unemployment income during the tax year, it’s important to make sure you properly report it on your tax return. Securing the help of a tax resolution attorney is the best way to ensure you properly navigate filing your tax return.


At Morgan Sebastian Law, Attorney Becky Sebastian is eager to help you navigate the complexities of your tax audit. As a trusted tax resolution lawyer, Attorney Becky has years of experience representing business owners and individuals who are facing IRS audits. She can provide you with the professionalism and peace of mind you deserve when dealing with the IRS. You can count on her to document all the evidence needed to achieve a positive tax audit outcome.


To schedule a consultation with an experienced tax resolution lawyer, call (877) 223-6605 or fill out our online contact form.