Taxable unemployment compensation

Millions of Americans received unemployment compensation in 2020, many of them for the first time. This compensation is taxable and must be included as gross income on their tax return.

Taxpayers can elect to have federal taxes withheld from their unemployment benefits or make estimated tax payments, but many do not take these options. In that case, taxes on those benefits will be paid when the 2020 tax return is filed. Taxes can be paid throughout the year. For safe and secure ways to pay taxes electronically go to IRS.gov/payments.

Taxpayers can find more details on taxable unemployment compensation in Tax Topic 418, Unemployment Compensation, or in Publication 525, Taxable and Nontaxable Income, on IRS.gov.

source: irs.gov