How to Pay Taxes on Unemployment Benefits
Unemployment is a lifesaver to those who suddenly find themselves without a job and other means of income. However, most are unaware that it is a taxable income and are usually unprepared when tax season arrives. Beneficiaries must begin to pay taxes on their unemployment income after they have received the first $2,400. They can choose to have the tax deducted automatically or make the payments on their own.
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Instructions
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Take out an amount for federal and state taxes every time you receive your unemployment check. The amount for federal taxes should be equal to 10 percent of the amount on the check. Contact your state's department of revenue to find out how much to take out for state tax. Recipients of unemployment benefits in Massachusetts will take out 5.3 percent.
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Pay a quarterly tax estimate directly to the IRS and to the department of revenue in your state. This helps you avoid having to pay a lump sum at tax time. Use the Estimated Tax for Individuals form (1040-ES) to pay your tax to the IRS. Your state's department of revenue will have a similar form for estimated state taxes.
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Consider having the paying agency withhold the taxes from your checks before they send them to you. The agency can withhold state and federal taxes and forward them to the IRS and your state's department of revenue respectively. Fill out an Income Tax Withholding Request Form (W-4V) and submit it to the agency responsible for paying your unemployment benefits. Submit it in person at the office or via mail. In some states you may be able to complete and submit the form online.
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