Alternate Names: Unemployment compensation, unemployment benefits, unemployment insurance payments
For example, if you are laid off from your job in California because your company decided to do away with your position, you may be eligible to apply for and receive unemployment income of $40 to $450 per week.
How Does Unemployment Income Work?
In the United States, unemployment income is administered by state unemployment offices in partnership with the federal government. It is intended to provide temporary wage replacement to workers who are actively seeking their next job. Although the federal government has unemployment guidelines that states must follow, each state has its own unemployment income rules, requirements, and application process. For example, states vary in the maximum length of time unemployed workers can obtain unemployment income. Most states pay unemployment income for up to 26 weeks, but Arkansas, for example, only offers a maximum of 14 weeks, and Massachusetts offers a maximum of 30 weeks.
State Unemployment Benefits
People seeking to receive unemployment income, then, must meet their state’s eligibility requirements and apply to receive unemployment income with their state. In most cases, their unemployed status must be as a result of circumstances beyond their control, such as being laid off or the company they work for going out of business. People who are terminated for breaking company rules or who quit their jobs without just cause are usually not eligible to receive unemployment benefits. State unemployment income administration and benefits are funded through both federal and state taxes. At the federal level, employers pay the Federal Unemployment Tax (FUTA) that is used to fund federal- and state-level administrative costs associated with distributing unemployment income. Employers—and, in some states, employees—also pay state unemployment taxes in amounts set by each state. These taxes fund the state’s unemployment trust fund from which benefits are paid.
How Much Are Unemployment Income Taxes?
In general, unemployment income is considered taxable income on your federal income tax return. It is taxed as ordinary income using the tax rates currently in effect for your filing status. So unemployment compensation received in 2021 may be taxed at a rate as low as 0% (if your taxable income is below the standard deduction amount for your filing status) or as high as 35% for federal income tax purposes. After the new year, states issue unemployment income recipients a Form 1099-G indicating the amount of unemployment income they received the previous year. Some states offer recipients of unemployment income the option to have taxes withholding from their payments. Recipients who do not opt for unemployment income withholding may want to consider making estimated tax payments to avoid paying an underpayment of estimated tax penalty. State taxation of unemployment income varies, with some states such as California exempting unemployment income from state income tax but other states such as New York taxing unemployment income.
How To Get Unemployment Income
In order to get unemployment income, there are some important steps to follow.
