Taxes and Unemployment Compensation: What You Need to Know Before Filing
A breakdown of your 1099G from Unemployment Compensation
Taxes and unemployment compensation, ID theft, repayments, and other problems
Last updated: February 17, 2020
Do I need to report the UC I got last year (2020) on my federal tax return?
Yes! If you are filing a 2020 federal tax return with the IRS, you have to report all the unemployment compensation (UC), including pandemic unemployment assistance, you were paid in 2020.
If you got UC in 2020, you should have received a UC-1099G and/or a PUA-1099G in the mail from the PA Department of Labor or online in your UC account. The 1099 forms will have the total amount of UC paid to you, which includes any federal taxes withheld, and it also will have the amount of those taxes. There is more information about these forms at this link: https://www.uc.pa.gov/faq/claimant/Pages/Payment-UC-1099G-FAQS.aspx
UC income does not need to be reported on Pennsylvania or Philadelphia income tax returns.
If I got a 1099G from unemployment compensation but never applied for or received any UC benefits, what do I do?
You were likely a victim of identity theft. If you got a 1099G because someone used your identity to claim UC, report the fraud to the PA Department of Labor and Industry here.
When you file your taxes, you do not have to report the fraudulent UC from the 1099G on your tax return. However, you do need to report the fraud to the PA Department of Labor and Industry as soon as possible.
If you do not report the fraud to the Department of Labor, you should expect that the IRS will send you a notice later saying that you owe more tax because you didn’t report all your income. Even if you do report the fraud, depending upon how the Department of Labor responds, the IRS may still send you a notice about the fraudulent UC.
PLA may be able to help if the IRS contacts you about UC benefits that you did not report on your tax return because you were the victim of ID theft.
If some of my UC benefits were taken to repay the government for UC that I incorrectly received in 2020 or another year, what do I report on my taxes?
If you had to repay the government for UC that you mistakenly/incorrectly received in 2020, you only have to report the amount of unemployment compensation benefits that you got to keep as income on your 2020 tax return. But, next to that, on Schedule 1 of your tax return, you do also need to report the amount you “Repaid”. The amount you report as income plus the amount you report as “repaid” should equal the total amount of UC on your 1099G form(s).
If you had to repay UC that you mistakenly/incorrectly received in 2019 or an older year, you need to report all the unemployment compensation benefits you received on your 2020 return, including the unemployment compensation benefits that were taken from you for the overpayment.
But, if you repaid more than $3,000 in 2020, you can either:
1. Claim the amount you repaid as an itemized deduction, or
2. Claim a credit for the amount of tax that the repaid UC cost you in the year when you originally received it
These options are available whether the repayment was taken out of your UC or out of a tax refund, or if you paid out of pocket (but you’ll need proof of the payment). Ask your tax preparer which option saves you the most money on your 2020 return.
Unfortunately, if you repaid $3,000 or less for a 2019 or older UC overpayment, the law doesn’t give you any tax relief. But, depending upon your total income in 2020, it might not even have any effect on your 2020 taxes.
If the 1099G I got says I was paid more UC than I actually received in 2020, what do I report on my taxes?
You only need to report UC that you actually got in 2020. UC that you didn’t get until 2021 doesn’t need to be reported on a 2020 tax return. The IRS considers that you got it in 2020 if in 2020 the money was deposited into a bank account that you had access to, or if a check or payment card was delivered to your address and you received it.
If the 1099G you got says you were paid more UC than you got last year, and it isn’t because some of your UC was taken for a UC overpayment or because you were a victim of ID theft, you should contact the PA Department of Labor to ask them to issue you a corrected 1099G before you file your tax return.
If you still disagree, ask for a detailed statement of every UC payment the State says they sent you, including the date and amount of the payment and the account number or address to which it was sent. Then come to us to see if we can help!