Your unemployment insurance benefits are taxable. Any unemployment benefits you receive including benefits paid under any regular state program, extended benefit program, trade readjustment allowance benefits and disaster unemployment assistance benefits must be reported as part of your gross income on your federal and state income tax returns.
You can make estimated payments
Depending on your tax status, you may be responsible for making estimated quarterly tax payments directly to the U.S. Internal Revenue Service (IRS) and the Massachusetts Department of Revenue (DOR) for the amount of tax you owe.
Generally, you must make estimated tax payments if you expect to owe, after subtracting withholding and credits, at least $1,000 in tax to the IRS and/or $400 in tax to the DOR.
To figure and pay estimated tax to the IRS, use federal Form 1040-ES, Estimated Tax for Individuals; for the DOR, use Estimated Income Tax Vouchers (Form 1-ES). Failure to file quarterly, if required, results in penalties. (If you need assistance in calculating federal or state estimated tax payments, call the IRS at 1-800-829-1040 or the DOR at 1-800-392-6089.)
You can have taxes withheld
If you wish, you may choose to have federal and/or state taxes withheld from your unemployment benefit payments as you receive them. You may request to have federal and/or state taxes withheld from your weekly benefit check and forwarded by DUA to the IRS and the DOR automatically.
The federal tax withheld would be 10 percent of your weekly benefit payment rate. The state tax withheld would be 5.3 percent. The following January DUA will mail to you, for filing purposes, a statement 1099-G showing total benefits paid and taxes withheld during the previous calendar year.
A typical example:
|Unemployment insurance benefit rate||=||$325.00|
|Dependency allowance||=||50.00||(two children)|
|Federal tax withheld||=||-37.00|
|State tax withheld||=||-19.00|
|Net weekly unemployment benefit payment rate||=||$319.00|
If you have partial earnings or pension deductions, DUA will subtract these amounts before calculating the tax-withholding amount. If you have a court-ordered child support payment or a UI overpayment recovery deduction on your claim, you should speak to one of our agents before deciding whether or not to request tax withholding.
In order to have taxes withheld from your UI benefit payment, you must complete an Income Tax Withholding Request Form To request tax withholding, complete the appropriate sections on the form and mail it to:
Department of Unemployment Assistance
Income Tax Withholding Unit
P.O. Box 8070
Boston, Massachusetts 02114
You can also submit your income tax withholding request online. Register for online services
If, at any time, you change your mind and would like to have tax withholding started or stopped on your claim, you will be allowed to change your election. However, changes will not apply to any benefit payments made prior to the effective date of the change. In addition, taxes already withheld from your claim cannot be refunded to you by DUA.
If you do not wish to have taxes withheld from your UI benefit payments, you do not need to do anything. DUA will not withhold income taxes from your unemployment benefit check unless you specifically request it.
If you do not have taxes withheld from your benefit payment, DUA will send you an IRS Form 1099-G in January. The 1099-G shows the total amount of unemployment benefits you received during the prior year. You will need this form when you file your tax returns.