Unemployment compensation is generally included in gross income reported on the taxpayer's individual tax return. (An exception is if the taxpayer contributed to a governmental program and the contributions weren't deductible. In that case, unemployment compensation received under the program isn't included in income until after the contributions are recovered.)
Unemployment compensation generally includes amounts received under the unemployment compensation laws of the United States or of a state, including the following:
- Benefits paid by a state or the District of Columbia from the Federal Unemployment Trust Fund
- Benefits paid by a state under its own unemployment insurance program
- Railroad unemployment compensation benefits
- Disability benefits paid as a substitute for unemployment compensation
- Trade readjustment allowances under the Trade Act of 1974
- Unemployment assistance under the Disaster Relief and Emergency Assistance Act of 1974
- Unemployment assistance under the Airline Deregulation Act of 1978
If a taxpayer received unemployment compensation during the year, they should receive Form 1099-G showing the amount they were paid. If they didn't receive Form 1099-G, they should check with the state that should have issued it.
Repayment of Current Year Unemployment
If unemployment benefits were paid and then later denied, or more benefits were paid out than were entitled to, the benefits must be repaid. If current year unemployment compensation was repaid, you will enter the repayment amount and it will reduce the amount received in the current year.
If the taxpayer repaid benefits that were included in income in a prior year, how they are treated depends on the year and the amount.
- If the amount repaid is $3,000 or less:
- 2018 and forward - no deduction.
- 2017 and prior - miscellaneous itemized deduction.
- If the amount repaid is more than $3000 - miscellaneous itemized deduction or a credit under claim of right, whichever results in less tax.
To enter unemployment compensation in TaxSlayer Pro, from the Main Menu of the tax return (Form 1040) select:
- Income
- Unemployment Compensation (1099-G Box 1)
To enter a repayment of unemployment compensation that was received in the same year in TaxSlayer Pro, from the Main Menu of the tax return (Form 1040) select:
- Income
- Unemployment Compensation (1099-G Box 1)
- Other - Enter the current year repayment for the taxpayer or spouse, as appropriate.
To enter a repayment of unemployment compensation that was received in a prior year in TaxSlayer Pro, from the Main Menu of the tax return (Form 1040):
For repayment of $3,000 or less:
- The Tax Cut and Jobs Act suspended itemized deductions subject to the 2% of AGI limitation through 2025. The taxpayer is no longer able to deduct the repayment in the year paid.
For repayment over $3,000:
- Use the instructions and example in Publication 525 to determine which is more advantageous for the taxpayer, deducting the repayment or taking a credit for claim of right.
- If taking a deduction, enter it as a miscellaneous deduction in Schedule A.
- If taking a credit, enter it as a repayment under the Payments, Estimates & EIC menu. Where the repayment appears in the return varies by year:
- 2021: Schedule 3 line 13d "Credit for repayment of amounts included in income from earlier years".
- 2020: Schedule 3 line 12d labeled "IRC 1341"
- 2019: Schedule 3 line 13d labeled "IRC 1341"
- 2018: Schedule 5 line 74d labeled "IRC 1341"
Note: This is a guide on entering Unemployment Compensation into the TaxSlayer Pro program. This is not intended as tax advice.
Additional Information: