The Internal Revenue Service issued a reminder that unemployment compensation is taxable.
Taxpayers can have tax withheld from these benefits now to avoid owing taxes on this income when the federal income tax return if filed next year.
Withholding is voluntary. Federal law allows any recipient to choose to have a flat 10% withheld from the benefits to cover part or all of the tax liability. To do that, a taxpayer should complete Form W-4V, Voluntary Withholding Request, and give it to the agency paying the benefits. They should not send it to the IRS. If the payor has its own withholding request form, taxpayers can use it instead.