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Unemployment Benefits Related Questions

Are unemployment benefits taxable? Can self-employed individual’s claim benefits? These types of questions are pretty common to those that want to file for unemployment benefits. Legal Experts can help answer questions pertaining to your circumstances.

If you are looking for additional information, then read below where verified Experts have answered similar questions.

What is an unemployment benefit?

Unemployment benefits are payments made by the state or others to unemployed individuals. Individuals must be qualified and will typically need to actively look for other work or compensation while receiving benefits.

Should unemployment benefits be reported on income tax returns?

The unemployment benefits that individuals receive are to be reported on that individual’s tax return for the year in which the benefits were received. If the benefits were received this year then when it is time to do this year’s return they should be reported (2015 benefits get reported on the 2015 tax return). If an individual had forgotten to add the unemployment to the return then they are required to submit an amended return. If the person fails to do this, then the IRS will make the correction and bill the individual the amount plus interest and penalties.

If a person received disability and unemployment benefits are they both taxable?

Taxability of benefits depends on what type of benefits they are. Unemployment benefits are taxable depending on what type of program is paying the benefits. Unemployment compensation benefits that are taxable include:

  • State unemployment compensation.
  • Benefits from the Federal Unemployment Trust Fund.
  • Railroad unemployment compensation benefits.
  • Disability benefits paid as a substitute for unemployment compensation.
  • Unemployment assistance under the Disaster Relief and Emergency Assistance Act of 1974.
  • Trade readjustment allowances under the Trade Act of 1974.

Social Security Disability benefits are not taxable for the majority of people. Disability benefits may be taxable if the person’s income is above certain limits.

Why would an ex-employer offer a person severance if that person was already collecting unemployment?

The employer is likely trying to see if they can pay the ex-employee the severance in order to save themselves in the next year when employment taxes are calculated. The more unemployment that is paid out from the employer’s account the higher their premiums are the next year for all employees. The ex-employer is likely trying to lower their premiums.

Does self-employment income need to be reported on an unemployment benefits claim?

Having self-employment income essentially makes the person self-employed. Self-employed individuals are not eligible for unemployment compensation benefits. If the person is receiving benefits plus 1099 income then they will have to repay the amounts received in the benefit.

Would a person qualify for unemployment benefits after losing their W-2 job but works a 100% commission job?

If a person qualifies for unemployment due to losing their wage paying job they can still earn money in other ways. Any wages earned will reduce the amount of weekly unemployment benefits. If weekly benefits are $400 and that person earns $300 week through commissioned jobs, then the $300 should be reduced by 20% ($240). This amount would be the reduction amount. The reduction amount of $240 should be subtracted from the benefit amount. The new unemployment benefit amount for the week will be $160.

Unemployment benefits can be beneficial to those that have lost their job. You may find that you have additional questions such as what are the qualifications or how to extend unemployment benefits. Experts are available 24/7 online to answer these questions and more. Contact verified Experts now so that you have clarity from the comfort of your home.

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