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Division of Unemployment Insurance URL reading ( My Unemployment . NJ . Gov )

Federal income taxes on Unemployment Insurance benefits

IRS 1040 form

Although the state of New Jersey does not tax Unemployment Insurance benefits, they are subject to federal income taxes. To help offset your future tax liability, you may voluntarily choose to have 10% of your weekly Unemployment Insurance benefits withheld and sent to the Internal Revenue Service (IRS).

You can opt to have federal income tax withheld when you first apply for benefits. You can also select or change your withholding status at any time by writing to the New Jersey Department of Labor and Workforce Development, Unemployment Insurance, PO Box 908, Trenton, NJ 08625-0908. Click here for the "Request for Change in Withholding Status" form.

After each calendar year during which you get Unemployment Insurance benefits, we will provide you with a 1099-G form that shows the amount of benefits you received and taxes withheld. This information is also sent to the IRS.

Identity theft/fraud alert: If you receive a 1099-G but did not receive Unemployment Insurance compensation payments in 2020, you may be the victim of identity theft. Please report your case of suspected fraud as soon as possible online or by calling our fraud hotline at 609-777-4304.

IMPORTANT INFORMATION FOR TAX YEAR 2020:

  • If you received Unemployment Insurance, Pandemic Unemployment Assistance (PUA), Pandemic Emergency Unemployment Compensation (PEUC) or Extended Benefits (EB), you may have chosen to withhold 10% of your benefits for tax purposes. Depending on your tax bracket, you could owe additional taxes and are responsible for declaring the income.

  • The option to withhold taxes was not available for the supplemental $600 and $300 Federal Pandemic Unemployment Compensation (FPUC) or $300 FEMA Lost Wages Assistance payments. You are responsible for paying any required federal taxes on any unemployment compensation payments you received in 2020, including these new COVID-19 related programs, in 2020. 

  • For example: If you received 35 weeks of the maximum benefits ($713 x 35) in 2020, plus FPUC (17 weeks x $600), plus FEMA/LWA (6 weeks x $300), your Form 1099-G will show the sum of all of these payments ($36,955). This does not include any taxes you chose to have withheld.

  • If you were overpaid benefits, your 1099-G will still reflect, per federal law, the amount of funds paid to you, regardless of any funds you have returned. Please refer to the section titled “Repayments” in the IRS Publication 525 Taxable and Nontaxable Income for guidance on how to report overpayments/returned funds.

  • Please note that your 1099-G reflects the total amount paid to you in 2020, regardless of the week that payment represents. Meaning, if you were paid in 2020 for weeks of unemployment benefits from 2019, those will appear on your 1099-G for 2020. Similarly, if you were paid for 2020 weeks in 2021, those will not be on your 1099-G for 2020 – they will appear on your 1099-G for 2021.

  • The American Rescue Plan Act, signed March 11, 2021, makes the first $10,200 of unemployment benefits tax-free for households with incomes below $150,000. The IRS has released guidance for claimants who filed their federal taxes before the signing of the American Rescue Plan Act. This is administered by the IRS so there is no need to call the Department of Labor. Learn more and seek IRS guidance at irs.gov, or consult a tax professional.

  • If we have your email address on file, we have sent you via email the information for your 1099-G for 2020.

  • 1099-G information will also be available from the Check Claim Status tool no later than January 30. It will not be available in your unemployment dashboard.