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TurboTax Help

Does ARPA change how unemployment affects my taxes?

The IRS, and most states, consider unemployment payments as taxable income. This means that you have to pay tax on these payments and report them on your return. With the new American Rescue Plan, if your modified adjusted gross income is less than $150,000, the first $10,200 of unemployment will be tax free, per taxpayer on your federal return, but any amount you receive above that will be taxed.

1. Your 1099-G tells you how much income you received and how much tax you paid

State unemployment divisions issue an IRS Form 1099-G to every person who gets unemployment benefits during the year. Take a look at yours. Box 1 shows the total amount of your compensation. If you chose to have income tax withheld, your total federal tax withheld will be in box 4, and your total state tax withheld will be in box 11.

2. Your state might not tax your unemployment income

While the federal government considers unemployment as taxable income, not all states do. That means that your state might not impose an income tax on the compensation you received this year. Check to see if your state is following the new federal guidelines. When you enter your Form 1099-G, we’ll determine whether or not you need to pay any state income tax.

To help at tax time, consider withholding taxes from your unemployment payments up front. You can usually do that by marking a checkbox or choosing that option when you’re filling out your request. You can also fill out Form W-4V, Voluntary Withholding Request and send it to your state unemployment office.

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