Topic 418 - Unemployment CompensationUnemployment compensation generally includes any amounts received under the unemployment
compensation laws of the United States or of a state. It includes state unemployment
insurance benefits and benefits paid to you by a state or the District of Columbia
from the Federal Unemployment Trust Fund. It also includes railroad unemployment compensation
benefits, but not worker's compensation.
Supplemental unemployment benefits received from a company financed fund are not
considered unemployment compensation for this purpose. These benefits are fully taxable
as wages, and are reported on Form W-2 (PDF).
Unemployment benefits from a private fund to which you voluntarily contribute are
taxable only if the amounts you receive are more than your total payments into the
fund. This taxable amount is not unemployment compensation; it is reported as other
income on Form 1040 (PDF).
If you received unemployment compensation during the year, you should receive Form 1099-G (PDF) showing the amount you were paid. Any unemployment
compensation received during 2003 must be included in your income.
If you received unemployment compensation, you may be required to make quarterly
estimated tax payments. However, you can choose to have federal income tax withheld.
For more information, refer to Form W-4V (PDF), Voluntary
Withholding Request. For more information on estimated tax, refer to Topic 355.
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