Your Taxes and Unemployment compensation
Many of my clients have been calling me over the past several weeks and as year-end draws near I’m sure more calls will be forthcoming, regarding taxation of unemployment checks due to Coronavirus.
If you received, or are currently receiving unemployment compensation, it is important to know that unemployment compensation is taxable.
By law, unemployment benefits must be reported on your federal and state income tax returns for the tax year in which it was received. Taxable benefits include any of the special unemployment compensation authorized under the Coronavirus Aid, Relief, and Economic Security (CARES) Act as a result of the COVID-19 pandemic.
Reporting unemployment compensation
In January 2021, unemployment benefit recipients should receive a Form 1099-G, Certain Government Payments, showing the amount of unemployment compensation received during 2020 and any tax withheld.
Report this information, along with other income, on your 2020 federal and state tax returns.
As the year draws to an end I hope this helps people out with their tax planning.