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Rev. date: 11/2005


Unemployment Compensation

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Tele-Tax Topic 418
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Unemployment compensation is includible in gross income. You must report unemployment compensation on line 19 of Form 1040, line 13 of Form 1040A, or line 3 of Form 1040EZ. However, for 2009, the first $2,400 of unemployment compensation is excluded from income and should be excluded from the amount reported on your tax return.
Unemployment compensation generally includes any amounts received under the unemployment compensation laws of the United States or of a state. It includes state unemployment insurance benefits and benefits paid to you by a state or the District of Columbia from the Federal Unemployment Trust Fund. It also includes railroad unemployment compensation benefits, disability benefits paid as a substitute for unemployment compensation, trade readjustment allowances under the Trade Act of 1974, and unemployment assistance under the Disaster Relief and Emergency Assistance Act of 1974. Unemployment compensation does not include worker's compensation.
If you received unemployment compensation during the year, you should receive Form 1099-G showing the amount you were paid. Any unemployment compensation received during the year must be included in your income, unless you contributed to the fund. See Below. In addition, for 2009, the first $2,400 of unemployment compensation is excluded from gross income.
If you received unemployment compensation, you may be required to make quarterly estimated tax payments. However, you can choose to have federal income tax withheld. For more information, refer to Form W-4V, Voluntary Withholding Request.
Supplemental unemployment benefits received from a company financed fund are not considered unemployment compensation for this purpose. These benefits are taxable as wages, and are subject to income tax withholding. They may be subject to social security and Medicare taxes as well. Supplemental unemployment benefits are reported to you on Form W-2. For more information about supplemental unemployment benefits, see Publication 15-A , section 5, page 12.
Unemployment benefits from a private fund (or, in some cases, public fund) to which you voluntarily contribute are taxable only if the amounts you receive are more than your total payments into the fund. This taxable amount is not unemployment compensation; it is reported as other income on Form 1040.
For more information, see Unemployment Benefits in Publication 525, on page 27.