Is Unemployment Compensation Taxable?

Category : Tax

Short answer: Yes

Yes, your state unemployment insurance benefits (up to 26 weeks) and your extended benefits (up to an
additional 13 weeks) are taxable. You may choose to have 10% withheld for federal taxes by completing
Form W-4V. The State will provide you with a Form 1099-G prior to January 31st of each year, showing
the amount of taxable benefits paid in the prior year.

Temporary Suspension of Tax on Portion of Unemployment Benefits
For tax year 2009, each taxpayer can exclude from gross income up to $2,400 of unemployment
compensation. Unemployment compensation over $2,400 is subject to federal income tax.
Individuals who receive unemployment benefits in 2009 should check their withholding to ensure
they are not having unnecessary tax withheld

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