Unemployment benefits are subject to taxation, the Internal Revenue Service reminded taxpayers Feb. 5 in an emailed news release.
"You must include in income all unemployment compensation you receive," according to IRS Publication 525. "You should receive a Form 1099G showing in box 1 the total unemployment compensation paid to you. In most cases, you enter unemployment compensation on line 19 of Form 1040, line 13 of Form 1040A, or line 3 of Form 1040EZ."
Also taxable are supplementary unemployment benefits received from an employer-funded system.
"Benefits received from an employer-financed fund (to which the employees did not contribute) are not unemployment compensation," according to Publication 525. "They are taxable as wages and are subject to withholding for income tax. They may be subject to social security and Medicare taxes. For more information, see Supplemental Unemployment Benefits in section 5 of Publication 15A, Employer's Supplemental Tax Guide. Report these payments on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040EZ."
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