2.5 Unemployment Benefits

All unemployment benefits received in 2012 are taxable. You should receive Form 1099-G, showing the amount of the payments. Report the payments on Line 19 of Form 1040, Line 13 of Form 1040A, or Line 3 of Form 1040EZ.

Supplemental unemployment benefits paid from company-financed funds are taxable as wages and not reported as unemployment compensation. Such benefits are usually paid under guaranteed annual wage plans made between unions and employers.

Unemployment benefits from a private or union fund to which you voluntarily contribute dues are taxable as “other” income on Form 1040, but only to the extent the benefits exceed your contributions to the fund. Your contributions to the fund are not deductible.

Workers’ compensation payments (2.13) are not taxable.

Taxable unemployment benefits include federal trade readjustment allowances (1974 Trade Act), airline deregulation benefits (1978 Airline Deregulation Act), and disaster unemployment assistance (1974 Disaster Relief Act).

Repaid supplemental unemployment benefits.

If you had to repay supplemental unemployment benefits to receive trade readjustment allowances (1974 Trade Act), taxable unemployment benefits are reduced by repayments made in the same year. If you repay the benefits in a later year, the benefits are taxed in the year of receipt and a deduction may be claimed in the later year. If the repayment is $3,000 or less, an “above-the line” deduction is allowed; add it to your other adjustments to income on Line 36 of Form 1040; label it “sub-pay TRA.” If the repayment exceeds $3,000, you have the choice between a deduction or a credit(2.8).