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Unemployment Compensation & State Taxes

There are two things you need to know when you have unemployment compensation income.

Unemployment compensation is taxable. Your unemployment compensation is taxable on both your federal and state tax returns. Be sure to include information from your 1099G. If you did not receive this form in the mail, refer to the Department of Workforce Development’s website, you may need to enter the Uplink system to print your copy.

Form 1099G reports the total taxable income DWD issues you in a calendar year and is reported to the IRS. As taxable income, these payments must be reported on your state and federal tax return.

Total taxable unemployment compensation includes the new federal programs implemented in 2020 due to COVID-19:

  • Federal Pandemic Unemployment Compensation (FPUC)
  • Pandemic Emergency Unemployment Compensation (PEUC)
  • Pandemic Unemployment Assistance (PUA)
  • Lost Wages Assistance (LWA)

Note: Unemployment income is not considered earned income for the Indiana Earned Income Tax Credit.

You may be eligible for a deduction. You may be able to reduce or even eliminate any state tax due on your unemployment compensation. Be sure to complete the unemployment compensation deduction worksheet found in the income tax instruction booklet.

Victims of Unemployment Fraud

What do you do if you’re a victim of unemployment fraud? Report it to the DWD immediately through their website. If you’re a victim of identity theft or someone has simply filed a fraudulent unemployment claim in your name, all the tools you need are on that website, including how to contact the Indiana State Police.

If you are ready to file your taxes with DOR and are a victim of ID theft do the following:

  1. Fill out the IRS ID Theft Affidavit.
  2. Email the IRS Affidavit and a copy of the fraudulent 1099G to DORITCInfo@dor.in.gov
  3. File your taxes and include all income information.

Below you will find some frequently asked questions and tips for next year if you continue to receive unemployment compensation.

Frequently Asked Questions

How can I get some information about the 1099G I got from the Department of Workforce Development?
How can I file my state income taxes for free?
Does the Indiana Department of Revenue (DOR) have a payment plan option?
Where do I find information for estimated tax?
How do I contact DOR?

Planning for Next Year

If you continue to receive unemployment compensation next year, keep in mind the following tips to help plan and reduce your stress for next tax season:

  • Keep track of possible deductions and credits you might be able to plan on.
  • Put some money back to ensure you are able to pay your taxes.
  • Find out how to pay estimated tax.
  • Visit the Indiana Department of Workforce Development to learn more about filing for unemployment and/or signing up to have Indiana State and county tax withheld. This way you won't need to pay all your tax at one time (when you file).

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