Unemployment Tax Issu

[B-ry]

Texas

I received unemployment compensation in 2010. Now they have decided to make me pay that all back. How does this affect my taxes. Do I need to include the the funds in my return or can I leave it off since I will eventually have paid them back?

 

[LdiJ]

Texas

I received unemployment compensation in 2010. Now they have decided to make me pay that all back. How does this affect my taxes. Do I need to include the the funds in my return or can I leave it off since I will eventually have paid them back?

I haven't run across that in a while, but I believe that you are going to have to include it on 2010 taxes, and then deduct it in the year you actually pay it back.

 

[swalsh411]

That is correct. You pay tax based on the year you received and then claim any prior year repayment as a deduction in the year it was repaid.

 

[davew128]

Well its not that simple. You can't just throw it on page 1 an adjustment to income in the year repaid. Depending on the amount of the repayment you can claim a credit for the amount of tax paid on the repaid amount under the claim of right.

 

[commentator]

You need to file the unemployment information with your 2010 income tax form, showing the unemployment as money you received. Because if you don't it will cross match, and very shortly, within the next year, you'll be hearing from the IRS, with penalties attached. The IRS does not know, and does not care that you have been assessed for the money back. This was done by the state system.

"They're going to make me pay it back" doesn't mean you will have to. It doesn't mean you have yet. If this overpayment was not the result of fraud, you may never be pursued to recoup the money. If you have merely received an unfavorable decision on a claim, and they have determined you overpaid, you may not be obligated to pay this back until you file for unemployment again, at which time it would be taken from your next claim. But that has nothing to do with what you received in 2010, or your 2010 income taxes.

They may never push this, and you may never have to pay it back. But one thing is for certain. You got it. This last year, you got it, and it is considered taxable income. What MAY happen, in terms of your paying the money back, probably isn't ever going to be deductible.

If you paid the money off in a lump sum during this year, you might possibly talk to a tax professional about filing an amended return...but you know, I'm by no means sure that would fly. Others will know more than I. But right now, pay the taxes on this income or you'll be in a world of trouble.