Unemployment Compensation

Unemployment compensation generally includes any amount received under an unemployment compensation law of the United States or of a state in the U.S. It is not considered earned income for the purposes of calculating EITC, but in most cases, unemployment compensation is taxable.

If taxpayers contribute to a governmental unemployment compensation program or a governmental paid family leave program and the contributions are not deductible, amounts received under the program are not included as unemployment compensation until the taxpayers recover their contributions. If the taxpayer has already deducted all of the contributions to the program, the entire amount received under the program is taxable.

Unemployment compensation is reported to the recipient on Form 1099-G.