Unemployment Benefits: Tax Issues

Unemployment Benefits: Tax Issues

General Questions

Yes, unemployment benefits, including UC, PEUC, FPUC, and PUA, all count as income for federal tax purposes. You will receive a 1099-G form at the end of each year that you will submit with your tax return.
However, unemployment benefits do not count as income for Pennsylvania taxes.

Yes, if you select federal withholding in the UC system or the PUA system, you will have 10% of your benefits withheld each week.

You can change your withholding preference (yes or no) in the online portal for both the UC system and the PUA system. You can also call the statewide UC phone number (888-313-7284) and ask a representative to change it.

Yes, you do have to report your UC benefits as earned income when you file taxes. You will get a 1099-G form in the mail that lists your income from UC, PEUC, PUC, and/or the Lost Wage Assistance program (the previous extra $300 per week). Now, under the American Rescue Plan, the federal government will forgive income taxes on up to $10,200 in benefits per person, as long as your adjusted gross income was less than $150,000. That means if you and a spouse both collected unemployment benefits, the government will forgive taxes on up to $20,400.


Philadelphia residents can have their taxes filed for free through the Campaign for Working Families. Visit their website at www.cwfphilly.org.

Generally speaking, most individuals do not need to worry about filing an amended 2020 return if they already filed and included their unemployment compensation income. The IRS started automatically refunding taxpayers in May, as described here: https://www.irs.gov/newsroom/irs-to-recalculate-taxes-on-unemployment-benefits-refunds-to-start-in-may.

However, there is an exception for people who have children and who were not eligible for the Earned Income Tax Credit (EITC) when they filed their 2020 returns with unemployment compensation included. If you would now qualify for the EITC because of the $10,200 exclusion, then you need to file an amended return. More information is available here: https://philalegal.org/news/tip-unemployment-claimants-who-did-not-claim-earned-income-tax-credi?fbclid=IwAR11vuYWgreuKqdBp5c6MMxuRp8dog5gDvvXPzrAfSbvDMlUs3y3ZlcHo_E.

There is no need to delay the filing of your 2020 return if you have not already filed. The IRS has provided instructions on how preparers can claim the $10,200 exclusion. These instructions are available here: https://www.irs.gov/forms-pubs/new-exclusion-of-up-to-10200-of-unemployment-compensation.

This decision is entirely up to you. The $10,200 exclusion only applies for 2020, not 2021. Therefore, you will still owe tax on your 2021 unemployment compensation. It depends on whether you prefer to pay the taxes now through withholding or if you want to pay the taxes later when you file your 2021 return in early 2022.

Where can I find my 1099-G?

Your 1099-G is available in the online portal, in both the UC system and the PUA system.

Here's how you find it:

Click on the “Unemployment Services” box on your home dashboard

Click on “Form 1099-G Information” to view and print your 1099-G form

Where can I change my tax withholding preference?

You can change your withholding preference (yes or no) in the online portal for both the UC system and the PUA system.  You can also call the statewide UC phone number (888-313-7284) and ask a representative to change it.

Here's how you change it on the portal:

Click on “Unemployment Services” on your home dashboard

In the list that opens up under Unemployment Services, click on “Federal Tax Deduction” to change your tax withholding preferences on the portal.