Collected Unemployment Benefits in 2022? Read on to See if They're Taxable

It's important tax information to have.

Sometimes, companies are forced to reduce their headcount when they run into financial issues or need to restructure. When you lose a job through no fault of your own, you're generally entitled to collect unemployment benefits through your state. Those benefits won't replace your missing paycheck in full, but they can sometimes replace a nice portion of it. And that could help you avoid completely depleting your savings account or racking up costly debt while you look for work.

If you collected unemployment benefits in 2022, you may be wondering if you need to report that income on your tax return. The answer is absolutely -- even though there was a brief point in time when unemployment income wasn't subject to taxes.

An exception during the pandemic

In 2020, the national unemployment rate reached a record high as widespread COVID-19 shutdowns forced millions of Americans out of their jobs. Back then, lawmakers were quick to not only send much-needed stimulus checks into Americans' bank accounts, but also, boost unemployment benefits to help jobless workers stay afloat at a time when finding a job was extremely difficult.

To further ease the burden on those without jobs, in 2021, the American Rescue Plan was signed into law, and it included a provision that made up to $10,200 of unemployment benefits collected in 2020 tax-free. As such, there may be confusion as to whether unemployment benefits are considered taxable. But you should know that tax-free treatment of unemployment benefits was limited to 2020 alone. And so if you received jobless benefits from your state in 2022, that's taxable income you need to report.

If you don't report your unemployment income, there's a good chance the IRS will flag your return for further scrutiny, as that data gets reported to the agency. So you might as well be honest about the benefits you received last year. 

Now, you may have had some taxes taken out of your unemployment benefits as you collected them. Typically, recipients of unemployment benefits can elect to have taxes withheld upfront, but that's not required. 

If you already paid taxes on your unemployment benefits, you may not owe the IRS more money as a result of having received those payments. But either way, you do need to report that income on your 2022 tax return. 

How to know how much unemployment income to report

Ideally, you kept good records of the unemployment benefits you received last year so you can report on that income accurately when you file your 2022 tax return. But if not, don't worry. You should receive Form 1099-G showing how much unemployment income you received in 2022 and how much tax, if any, was withheld from those payments. 

Some states send this form out in the mail, while others make it available on their websites. If you collected unemployment benefits last year but are missing this form, make sure to go to your state's website and aim to access it there so you can complete your tax return accurately.