Q I received Unemployment Compensation this year. Do I have to pay income tax on that money?
A For 2009, you must include in income all unemployment compensation you received that is more than $2,400. You should receive a Form 1099-G showing in box 1 the total unemployment compensation paid to you in 2009. You must subtract $2,400 from that amount to figure how much of your unemployment compensation is taxable and must be reported on your 2009 Federal Income Tax Return. Do not enter less than zero.
If married filing jointly, also include any unemployment compensation received by your spouse that is more than $2,400.
You can choose to have federal income tax withheld from your unemployment compensation. To make this choice, contact your local Unemployment Office. Tax will be withheld at 10% of your payment.
If you do not choose to have tax withheld from your unemployment compensation, you may be liable for estimated tax. If you do not pay enough tax, either through withholding or estimated tax, or a combination of both, you may have to pay a penalty.
