If you’re unemployed, plan to file a 2014 tax return. Unemployment benefits are taxable.
“Do I pay taxes on unemployment benefits?”, “Do I file taxes if I’m unemployed”. If you’re unemployed, these questions may sound familiar.
The answer to both is yes.
The bottom line is this; you’ll need to file a tax return and report all income received, including any unemployment benefits received.
Being under unemployment in 2014 doesn’t mean your free from filing a tax return. You’ll need to report your unemployment compensation sooner or later. It will be to your advantage to get it out of the way on time, during the 2015 tax season.
How to Report Unemployment Benefits on a Tax Return
Any income you receive during the tax year counts as income that you need to report on your tax return. Above all, the IRS considers unemployment benefits as income that you must report on a tax return.
At the start of the year, you’ll receive Form 1099-G, showing the amount you were paid in unemployment benefits throughout 2014. That being said, you’ll need this form to refer to when filing your 2015 tax return.
If you don’t have a 1099-G, you’ll still be able to report your unemployment benefits as long as you know the following information;
- the total amount of unemployment benefits paid to you during the year
- the amount of federal taxes withheld (if any)
- Federal ID Number
You’ll Probably Need to File Both a Federal & State Tax Return
Most states require residents to report unemployment income on a state tax return. In other words, plan on filing both a state and federal tax return.
However, if you live in one of the following states, you won’t need to report or pay tax on state unemployment benefits received, as they fully EXEMPT unemployment benefits;
- Alabama
- Arkansas
- California
- Montana
- New Jersey
- Pennsylvania
- Virginia
If you live in Indiana and Wisconsin, it’s good to note that unemployment benefits are partially exempt. For more information, visit your state’s taxation website.
Tax Tips for Unemployed
Here’s a few tips you’ll want to keep in mind regarding reporting your unemployment income on your taxes;
- supplemental unemployment benefits received from a company are fully taxable
- the IRS is willing to work with you- if you can’t pay your tax due, they’ll set up a payment plan
- if you don’t pay, you might not receive a refund in the future
- some state unemployment benefits are taxable while other’s aren’t
- if you received unemployment compensation, you may be required to make quarterly estimated tax payments
Tax Season 2015 Starts in January
Unemployment compensation is considered a replacement for your wages, explaining why it’s taxable. Starting in January, you’ll be able to e-file your 2014 tax return report any unemployment income received in 2014.
If you have any questions while completing a tax return, the RapidTax team is available via phone, chat or email to help you!
Photo via eFile989 on Flickr
