Many individuals will receive unemployment benefits if they lose their job or are laid off. Individuals receiving unemployment benefits will often ask a tax attorney if their unemployment benefits are taxable. Although, the benefit payments are helpful during unemployment these payments are taxable. The article below has been drafted by a Denver tax attorney at The McGuire Law Firm to outline a few issues and facts that taxpayer should be aware of when filing their 1040 individual income tax returns.
If you have received unemployment benefits, you should receive a Form 1099G in the mail. Form 1099G is a form that reports certain government payments. The unemployment compensation that is reported on the 1099G should be included with other income from the tax year. The 1099G will also show any federal tax that was withheld.
It is important to know that there are multiple types of unemployment income or compensation. Generally, unemployment compensation will include any amounts you have received under an unemployment compensation law within your state or the United States. Internal Revenue Service Publication 525 discusses types of taxable income and nontaxable income.
If you received benefits from regular union dues this amount should likely be included in your income on the 1040 tax return. Different rules and law may apply if you have contributed your union dues to a special union fund and the contributions are not deductible. If this is the case, you would likely include as income the amounts you received that are in excess of the union contributions you made.
You may choose to have federal income tax withheld from your unemployment benefits. You can choose to have tax withheld by completing Form W-4V, which is a voluntary holding request. If you do not have tax withheld, you may need to consider making estimated tax payments during the tax year.
You may also refer to Internal Revenue Service Publication 17, which discusses federal income tax in addition to Publication 525.
If you have questions regarding your unemployment benefits or other tax questions, please contact The McGuire Law Firm to speak with a Denver tax attorney. A tax attorney can assist you with your tax questions and issues and educate you regarding the tax laws and how these laws apply to you.
Contact The McGuire Law Firm to schedule your free consultation with a tax attorney in Denver or Golden Colorado. Law offices in Denver and Golden.