Unemployment compensation can include amounts received under the unemployment compensation laws of the United States or of a state. It includes unemployment insurance benefits and benefits paid to a taxpayer by a state or the District of Columbia from the Federal Unemployment Trust Fund. It also includes railroad unemployment compensation benefits, disability benefits paid as a substitute for unemployment compensation, trade readjustment allowances under the Trade Act of 1974, and unemployment assistance under the Disaster Relief and Emergency Assistance Act of 1974.
In the individual tax return, unemployment compensation is included in gross income reported on Form 1040. If the taxpayer received unemployment compensation during the year, they should have received Form 1099-G after the end of the year showing the amount they were paid.
Entering unemployment compensation
To enter unemployment compensation in TaxSlayer ProWeb, from the Federal Section of the tax return (Form 1040) select:
- Form 1099-G Box 1
- Add or Edit a 1099-G
Repayment of Current Year Unemployment
If the taxpayer repaid any current year unemployment benefits, e.g. due to them being later denied or due to more being paid out than they were entitled to, the amount repaid is entered separately from Form 1099-G.
To enter repaid current year unemployment compensation in TaxSlayer ProWeb, from the Federal Section of the tax return (Form 1040) select:
- Form 1099-G Box 1
- Repayment of Unemployment - Enter the amount repaid.
The total of Form(s) 1099-G minus the amount repaid will flow to Schedule 1, with "REPAID" and the amount printed on the same line.
Repayment of Prior Year Unemployment
If the taxpayer repaid in the current year unemployment compensation that had been included in income in an earlier year, how the repayment is treated in the tax return depends on the amount.
- If the amount repaid was $3,000 or less it cannot be deducted anywhere in the return.
- If the amount repaid was more than $3,000 the taxpayer can either calculate a claim of right tax credit or include the repaid amount as an itemized deduction, whichever is most beneficial to them. See here for more information.
Note: This is a guide on entering Unemployment Compensation into the Taxslayer Pro program. This is not intended as tax advice.
Publication 525, Taxable and Nontaxable Income