Unemployment income is taxable, so your refund depends on whether taxes were withheld

Unemployment benefits count as taxable income to the IRS. Whether you get a refund has nothing to do with receiving unemployment itself — it depends on whether your employer or the state withheld federal income tax from those payments, and whether your total income for the year pushed you into a higher tax bracket.

When you file your tax return, the IRS will ask about all income you received, including unemployment. You report this on Form 1040 using the amount shown on your Form 1099-G, which the state sends you by January 31. If taxes were not withheld during the year and you owed money, you will owe it when you file. If taxes were withheld, you may get a refund — the same way you would from any other job.

Key Takeaways

  • Unemployment benefits are reported to the IRS on Form 1099-G, and you must include this income when you file your tax return.
  • If you did not request tax withholding when you filed for unemployment, no federal taxes were taken out, and you may owe money instead of getting a refund.
  • You can request that the state withhold taxes from future unemployment payments, though this does not change what you owe on past payments.
  • If your only income was unemployment and it was below the filing threshold for your age and filing status, you may not owe taxes at all.
  • The IRS allows you to amend a prior-year return if you did not report unemployment income the first time you filed.

How withholding works with unemployment payments

When you first file for unemployment, most states ask whether you want federal income tax withheld from your weekly or biweekly payments. If you say yes, the state deducts a flat percentage — usually 10 percent — from each check and sends it to the IRS on your behalf. This works the same way withholding does at a regular job.

If you said no to withholding, or if you did not see the option, then zero federal taxes came out of your unemployment checks. This means you received the full amount, but you will owe taxes on it when you file. The amount you owe depends on your total income for the year and your filing status.

You cannot go back and request withholding on payments you already received. You can only request it on future payments. If you are still receiving unemployment, contact your state's unemployment office and ask to start withholding now. If you have already stopped receiving benefits, you will handle the tax debt when you file your return.

When you might owe money instead of getting a refund

If unemployment was your only income in the year and it was below the standard deduction for your age and filing status, you may not owe any federal income tax at all. For 2024, the standard deduction is $14,600 for a single filer under 65. If your unemployment income was less than that, you may not have a tax debt.

But if you had other income — from a job, self-employment, investments, or a spouse's income — your total might push you over the threshold. In that case, even if taxes were withheld from your unemployment, the withholding might not be enough. You would owe the difference when you file.

The IRS does not care where the income came from. It only looks at your total. If you earned $12,000 in unemployment and $8,000 from a part-time job, the IRS sees $20,000 in income. Depending on your withholding and credits, you might owe taxes on that combined amount.

What Form 1099-G tells you and when you receive it

Your state unemployment office sends you a Form 1099-G by January 31 of the year after you received benefits. This form shows the total unemployment benefits you were paid in the prior year and the federal taxes withheld, if any. You need this form to file your tax return accurately.

The form has five boxes. Box 1 shows your total unemployment benefits. Box 2 shows federal income tax withheld. If Box 2 is blank or zero, no taxes were taken out. If it has a number, that is what was sent to the IRS on your behalf.

If you do not receive your Form 1099-G by early February, contact your state's unemployment office. You can often view it online through your unemployment account. Do not file your tax return without this form — the IRS will have a copy, and if your return does not match, it will flag your file for review.

How to report unemployment on your tax return

You report unemployment income on Form 1040, the main federal tax form. On line 19b, you enter the amount from Box 1 of your Form 1099-G. This is your total unemployment benefits for the year, before any withholding.

The IRS then calculates your tax based on your total income, your filing status, and any credits you claim. If you had withholding (Box 2 on the 1099-G), that amount is credited against what you owe. If withholding was more than your tax, you get a refund. If it was less, you owe the difference.

If you are filing on paper, attach Copy B of your Form 1099-G to your return. If you are filing electronically, your tax software will ask you to enter the information from the form, and it will handle the rest.

What to do if you did not report unemployment income on a prior return

If you filed a tax return in a prior year and forgot to include unemployment income, you can fix it by filing an amended return using Form 1040-X. You have three years from the original due date to amend and claim a refund, but the IRS can audit you for unpaid taxes going back further.

To amend, you will need your original return, your Form 1099-G from that year, and Form 1040-X. You fill out the amended form showing the corrected income and recalculate your tax. If you owed taxes and did not pay them, you will also owe interest and possibly penalties, which the IRS will calculate.

If you think you may have missed reporting unemployment income, contact a tax preparer or the IRS directly. The sooner you file the amended return, the sooner you can resolve it. Waiting does not make the debt go away.

Requesting tax withholding on future unemployment payments

If you are currently receiving unemployment and did not request withholding, you can request it now. Log into your state's unemployment portal or call the unemployment office and ask to start withholding federal income tax on your next payment. Most states allow you to choose a withholding percentage or a flat dollar amount per week.

Requesting withholding now does not change what you owe on past payments. It only affects future checks. If you have already stopped receiving benefits, withholding is no longer an option — you will handle any tax debt when you file your return.

Some people choose not to withhold because they need the full amount each week. That is a choice you can make, but understand that you will owe taxes when you file. Others request withholding to avoid a large bill in April. There is no right answer — it depends on your situation and whether you can afford to set aside money for taxes.

Frequently Asked Questions

Can I get a refund if I did not have taxes withheld from unemployment?

Only if your total income for the year was low enough that you did not owe any federal tax, or if you had other income with withholding that exceeded what you owed. If unemployment was your only income and it was below the standard deduction, you would not owe tax and might not file at all. Otherwise, you would owe money, not get a refund.

What if the state withheld too much tax from my unemployment?

If withholding was more than your actual tax liability, you will get a refund when you file your return. The IRS calculates this automatically. The refund may be smaller than you expect if you have other income or if you do not claim certain credits.

Do I have to file a tax return if my only income was unemployment?

If your unemployment income was below the standard deduction for your filing status and age, you are not required to file. However, if taxes were withheld, you should file to get that money back. Filing is free and takes about 30 minutes.

What happens if I report unemployment income but the IRS does not have my 1099-G?

The IRS will eventually receive a copy from your state. If your reported amount does not match, the IRS will send you a notice asking for an explanation. Have your Form 1099-G ready and respond promptly. If there is a discrepancy, the IRS will correct it and recalculate your refund or bill.

Can I claim unemployment benefits as a deduction to lower my taxes?

No. Unemployment benefits are income, not a deductible expense. You cannot reduce your taxable income by claiming unemployment as a deduction. However, you may be able to claim other credits — like the Earned Income Tax Credit — depending on your total income and filing status.