As a result of downturn in the economy and layoffs resulting from businesses going out of business, it’s important for you to know whether or not unemployment benefits received during 2009 are taxable and also how to report those unemployment benefits. There is some good news, that a portion of the unemployment taxes are not taxable for 2009.
As a result of President Barack Obama signing the American Recovery and Reinvestment Act of 2009, the first $2,400 of unemployment income received during 2009 will be exempt from taxable income when taxpayers file their 2009 tax return. This legislation, is a small improvement from last year, since for many unemployed workers,the first $2,400 of unemployment benefits received in 2009 will be tax-free.
With millions of Americans unemployed, this form of legislation provides a little relief in the form of a tax break for unemployed taxpayers. Under this new tax law, those individuals who receive unemployment benefits during 2009 are eligible to exclude the first $2,400 of these benefits when they file their 2009 tax returns.
For a married couples, wherein both the husband and wife were unemployed and received unemployment benefits, then each may exclude the first $2,400 of unemployment benefits received per recipient during 2009 for a total of $4,800.
For those individuals unfamiliar with the forms and believe they have received unemployment compensation, the unemployment compensation is shown on Form 1099-G. The taxpayer would report the unemployment compensation on line 3 of Form 1040EZ, line 13 of Form 1040 A or line 19 of Form 1040. Further, if you made contributions to a government unemployment compensation program, then you are required to reduce the amount you report on Form 1040 by the total amount of those contributions that you made to a governmental unemployment compensation program. Also, if you received an overpayment of any unemployment compensation during 2009 and you have to repay any of that amount in 2009, then reduce the amount you report by the amount you repaid.
For more information regarding the treatment of overpayment and for other information regarding unemployment compensation please refer to IRS Publication 525. This article is not intended to be legal or accounting advice. Tax laws are complex, change constantly and each situation is unique. The reader is advised to do his or her own due diligence and consult competent professionals in these areas.
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