 which is that you would generally include unemployment compensation and income okay unemployment compensation is typically considered taxable income for federal income tax purposes reporting to the IRS recipients of unemployment compensation should receive form 1099 g certain government payments so that's usually what you're going to be receiving you'll get it the form for it it's usually fairly straightforward from a data input standpoint because you'll be getting the 1099 like with other 1099s that will typically go to the IRS as well and therefore the government already sees that income they know about it therefore you would think you'd have to report it typically in a similar ways you have to report W2 income and other 1099 income like interest and dividends and so on because if you don't the iris is going to catch that basically automatically they already have you know that information so obviously we report it because we're required to by law but also just note the iris of course has this information so that's from the state unemployment agency so this form reports the total amount of compensation received and any federal income tax withheld so if you get unemployment compensation you might have gotten withholdings from it sometimes people opt into that although they often do not note that if you have someone that's working at a W2 job and then they basically get laid off then the payments that they were making or the wages they were getting from the W2 job were typically or usually have unemployment I'm sorry the federal income taxes withheld meaning they probably provided their employer W4 form and the employer was forced into being the tax collector by the irs and therefore we're taking the federal income taxes out of the wages and paying that to the government for each paycheck when you get unemployment then you're getting a source of income but you don't have that same kind of withholding mechanism typically because the employer isn't forced to do it so you might choose if the unemployment is significantly high to have them withhold money from unemployment otherwise what's going to happen if it's significant if you have a lot of unemployment it's going to result in income that you have not done withholdings for which could lead to tax and it could lead to the sticks penalties and interest the metaphorical sticks of the irs also just realize however that if someone like worked for for three months let's say at a place of employment and they were having withholdings coming out of their paycheck then they probably are over withholding on the money coming out of their paycheck why because you'll recall that we have a progressive tax system so if you if you made a few thousand dollars in the first few months or something like that you would think that it wouldn't even be subject to tax because of the standard deduction and the tax brackets in the progressive tax system but what you have to do to do the estimated tax is try to project how much tax you're going to owe in the entire year and then you're going to basically take kind of like the average tax is one way that you can approach it that that that so you have a standard rate that's coming out of your paycheck for the entire year even though we have a progressive tax rate system so that means if you made a few thousand dollars in the first few months but you were expecting to make seventy thousand dollars in the year but you really only made like ten thousand dollars before you were laid off then you were probably having withholdings that were that were based on the idea that you're going to be making seventy thousand dollars which would be a higher tax bracket you see again this is an area where I where the progressive tax system is pretty easy to do the tax calculations once you have all the W2s and stuff but when you get into these planning situations it can it can kind of get complex so just some things to consider if you're talking to someone who's basically getting laid off and thinking well how much should I be withholding from possibly the unemployment is the unemployment subject to tax yes how much do I have to withhold well it depends what's one thing that you can do to try to estimate that you can go to the IRS website if you and take a look at the estimated tax payment calculator and that could help in those types of situations to see what withholdings should have