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Tax Information for the Unemployed

>>AMY SUSAN: Hi, Amy Susan, Director of Communications for the Missouri Department of Labor.  On this week’s edition of Labor Talk, a podcast where experts discuss workplace issues that affect your life, I’m joined here with Carol Luecke.  She is the Chief of the Benefits Section within the Department of Labor, and it’s a unit within the Division of Employment Security.  And we’re here to talk about taxes.  Tax season is right around the corner and we want to talk about how taxes pertain to unemployment benefits.  So first off, are unemployment benefits taxable?

>>CAROL LUECKE: Yes, Amy.  All unemployment benefits that are received are considered taxable.  It’s a taxable income that needs to be reported.

>>SUSAN: Okay.  What taxes are taken out of benefits?

>>LUECKE: Unemployment benefits, because it is a taxable income, both state taxes and federal taxes would be withheld from unemployment benefits.

>>SUSAN: Tell us, Carol, what decision does someone need to make when they’re filing unemployment or first starting to file that unemployment when it comes to taxes?

>>LUECKE: At the time that the claim is filed the claimant is given an option to have a federal tax withheld from their unemployment benefits.  We don’t offer that option for state taxes, but they can have the federal withheld.

>>SUSAN: Okay.  If they decide to have the federal taxes withheld what process needs to occur?

>>LUECKE: To have the federal taxes withheld they do need to complete a form.  We have an Authorization for Federal Income Tax Withholding from Unemployment Benefits in the State of Missouri.  This form is not available on our website.  It is something that would have to be requested.

>>SUSAN: Okay.  Are there any benefits to opting in, as you were saying, and deciding to have those federal taxes reduced, or deducted, pardon me, every week from your benefits?

>>LUECKE: That’s going to have to be a personal decision.  It’s really a case-by-case situation.  If someone has worked part of the year and therefore has already paid some federal taxes in on wages that they’ve earned during the year, it may not be a big issue for them to receive unemployment benefits and not have taxes withheld.  However, if you were unemployed for a long period of time, this is your only source of income, it’s a personal decision.  You know, can you afford to have the 10 percent withheld each week and still meet your financial obligations versus would I still be able to meet my Federal Government obligations at tax time.

>>SUSAN: Okay.  The bottom line, whether you’re working or whether you’re receiving unemployment benefits, they’re all taxable.

>>LUECKE: That’s correct.

>>SUSAN: Okay.  Tell us about the form that they need to get from our department to meet their tax obligations.

>>LUECKE: The other form that’s needed for tax time is your 1099, and this of course is your record of the total amount of unemployment benefits that were paid out during the tax year.  So for the 2010 unemployment benefits that were paid, we mailed out the 1099’s in January of this year, and we mailed just short of 400,000 form.

>>SUSAN: Wow, that’s a lot of mail.

>>LUECKE: It is.

>>SUSAN: Now, I understand you also are thinking about ways to improve the system, the process.  Tell us about that.

>>LUECKE: One of the problems that we have with mailing out the 1099’s, of course, at the end of the year is that a lot of times our customers or claimants have moved and they haven’t kept us informed of what their new address is.  So we receive a large number of the 1099’s returned by the Postal Service as unable to deliver.  So because of that problem, we are considering different options on how to get this information to all individuals to see whether or not we could perhaps offer more services on line.  Of course, we’ve got some federal guidelines that we have to stay within.  We’re reviewing those guidelines now to see what our options are.  Regardless of what course of action we decide to take, we will keep all the appropriate parties informed once a decision is made.

>>SUSAN: All right.  Well, thank you for joining us today.

>>LUECKE: Okay, you’re welcome.

>>SUSAN: If you all have any other questions you can visit moclaim.mo.gov to get that 1099 form or have other taxable questions, or visit labor.mo.gov.  Click on News and Notices and then click on Labor Talk Podcast.