Jobs have been fleeting the last few years. Fortunately, unemployment benefits have provided a safety net for many people. Most people don't realize that the taxability of these benefits is an issue.
The Great Recession has move through practically every financial industry and the end result has been huge increases in unemployment numbers. As I am writing this, the unemployment rate stands at just under 10 percent. That is staggering. It means roughly 1 in 10 people are without a job. Many others are working part time or reduced hours and thus are not counted as unemployed. All and all, it is a fairly dire situation and one can only hope business picks up and jobs start being created.
If we learned anything in the Great Depression, it was that certain safety nets needed to be built into society. Unemployment benefits are one such program and have really made a difference during the current Great Recession. Alas, tax is an issue with anything involving money in America. The same goes for this source.
Are unemployment benefits taxable? Sadly, the answer is yes. The IRS considers the payments you get as a form of wage replacement. This results in them be classified as income. You know what that means. Income is taxable. This raises the rather odd scenario where a person who needs help because they have no job must somehow pay tax out of their earnings.
So, what do you do? Well, you can file out and file a W-4 Form. It asks the government to do withholdings from the benefits so you don't owe at the end of the year. Alternatively, you can pay quarterly estimated taxes. In either situation, you are going to receive less money and that is going to hurt when you need it most.
Are unemployment benefits taxable? Yes. Sadly so.
Thomas Ajava writes for CorporationTaxLawyerIndiana.com - find a corporation tax lawyer in Indiana near you.
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