Federal Income Taxes & Your Unemployment Benefits
Getting ready to prepare your 2020 taxes? If you received unemployment benefits and/or pandemic unemployment assistance (PUA) benefit's, make sure to view the Texas Workforce Commission's (TWC) information on how federal law requires reporting all of the benefits as taxable income.
“Unemployment benefits are taxable income reportable to the Internal Revenue Service (IRS) under federal law. You must report all unemployment benefits you receive to the IRS on your federal tax return," notes TWC.
Withholding Taxes from Your Payments
If you are receiving benefits, you may have federal income taxes withheld from your unemployment benefit payments. Tax withholding is completely voluntary; withholding taxes is not required. If you ask us to withhold taxes, we will withhold 10 percent of the gross amount of each payment before sending it to you.
To start or stop federal tax withholding for unemployment benefit payments:
- Choose your withholding option when you apply for benefits online through Unemployment Benefits Services.
- Review and change your withholding status by logging onto Unemployment Benefits Services and selecting “IRS Tax Information” from the Quick Links menu on the My Home page.
- Review and change your withholding status by calling Tele-Serv and selecting Option 2, then Option 5.
- Complete and return TWC’s federal tax withholding form.