Unemployment Compensation: Do I have to Pay Taxes?
The IRS has a very interesting newsletter frequently asked questions related to job loss and its relation to taxes, here are the most important guidelines:
The following Questions and Answers are provided by the Internal Revenue Service (IRS) to clarify the financial implications related to taxes enfrentanlos employees who have lost their jobs. Have provided references for additional information.
“Severance pay is taxable?
Yes, severance pay is taxable in the year you receive it. Your employer will include the amount of these payments on Form W-2 and is going to withhold federal and state taxes. For additional information see (in English) Publication 525.
How about the hours accrued vacation or illness?
Yes, the annual pay or accrued vacation or sick are calculated by the employer as part of their salary and will be included on Form W-2.
Is Taxable Unemployment Compensation?
Yes unemployment compensation has been paid (up to 26 weeks) and extended benefits (up to 13 additional weeks) are taxable. You can choose to be 10% percent withheld for federal taxes by completing Form W-4V. The state will provide a Form 1099-G by 31 January each year, showing the amount of taxable benefits paid the previous year. For additional information see Publication 525.
* Temporary Suspension of a Portion of Tax on Unemployment Benefits Every taxpayer can leave out the gross income up to $ 2.400 for unemployment insurance for tax year 2009. Unemployment insurance over $ 2,400 is subject to federal income tax. People who receive unemployment benefits in 2009, should check their withholding to make sure that no withholding tax are unnecessary.
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Tags: Internal Revenue Service, IRS, Pay taxes, unemployment, Unemployment compensation