Withholding Tax Information on UI Benefit Payments

  • All UI benefits received after 1978 are taxable as income by the Internal Revenue Service.

  • On December 8, 1994, Public Law 103-465, known as the General Agreement on Tariffs and Trade (GATT), was signed into law by the President. GATT required States to implement a program offering claimants for unemployment benefits the option of having Federal Income taxes withheld from their benefit payments, versus having to pay the entire amount, when filing their tax returns. Claimants were given this option beginning with tax year 1997.

  • Effective 8/7/01: a flat Federal tax rate of 10% of the benefits paid can be withheld from each payment at the claimant's request.

  • Internal Revenue Service Form 1099G must be provided by the State to the claimant by January 31, showing the total amount of benefits paid and the amount of taxes withheld for the previous tax year.

  • References include: UIPL 38-01; UIPL 10-99; UIPL 32-96; UIPL 17-95 and UIPL 17-95, Change 1; Section 702 of Public Law (PL) 103-465; Section 11, Internal Revenue Service Publication 15, Circular E, Employer's Tax Guide; IRS Form 945, Annual Return of Withheld Federal Income Tax; and IRS Form 945-A, Annual Record of Federal Tax Liability.