Do you pay taxes on unemployment benefits in Massachusetts?

Withholding is a choice inside the application, and you can change it later from your online account. Leave it off and the tax on every paid week is still owed at filing time, so the choice is worth making early.

Have the tax taken out before the money arrives

Withholding is part of the application: complete the tax withholding section when you file. To change it later, log in to your Unemployment Services for Workers account and select Benefit details from the dashboard to edit the withholding information.

Leave it off and you pay at filing time instead. The IRS says you may be required to make quarterly estimated tax payments on unemployment compensation, and the Department of Revenue says you may pay estimated tax on the state side. Form W-4V, the IRS's Voluntary Withholding Request, is the federal route to withholding on this income.

What Massachusetts taxes, and at what rate

Unemployment compensation belongs in both federal and Massachusetts gross income for the year you received it. Massachusetts taxes personal income at 5%, the rate the Department of Revenue publishes on its Massachusetts tax rates page.

On the state return you enter the same amount you reported federally, on MA Form 1 or on Form 1-NR/PY, and attach a copy of your 1099-G. If you elected voluntary withholding of Massachusetts tax, the withheld amount shown on the 1099-G goes on the return as well.

Whether you owe it does not depend on living here now:

• Nonresidents owe Massachusetts income tax on unemployment compensation related to previous employment in Massachusetts.
• Part-year residents owe it on compensation received while a Massachusetts resident, whether the work behind it was inside the state or outside it.

Form 1099-G, and how to get a copy

DUA mails 1099-G forms by the end of January for the previous year, so benefits collected across one year arrive on a form the following January. The copy in your account appears on the same timing.

1. Log in to your Unemployment Services for Workers account.
2. Select Additional Services.
3. Find the box titled 1099 and use the link to get your form.

DUA's page on requesting a 1099-G carries those steps, and the 1099-G request line, (617) 626-5647, does the same job by phone.

On the federal return, the IRS wants the total from Box 1 on line 7 of Schedule 1, Form 1040, and the federal tax withheld from Box 4 on line 25b of Form 1040 or Form 1040-SR.

If the 1099-G is wrong, or covers a claim you did not file

Someone else claiming benefits in your name shows up as a 1099-G for money you never received. Report it on DUA's unemployment fraud page or by phone on (877) 626-6800. DUA then locks the claim and issues no benefit payments on it, does not report any amount already paid to the IRS as your income, and can send a corrected 1099-G if one has already gone out. The IRS asks fraud victims to do exactly this: tell the state agency about the inaccuracy in Box 1 and ask for a corrected form.

Where the figure is wrong for some other reason, the Department of Revenue wants a corrected Form 1099-G, plus documents proving the correct benefits, filed with an amended or abatement return. Leaving the compensation off an e-filed return does not settle it. The software lets the return through, then the refund is held up and a letter asks you to document the correct amount.

If you paid benefits back

Repay in the same year you received the money and you subtract the repaid amount from the total, then report the difference as income. That happens when an overlap leaves you drawing benefits in weeks you were already employed.

Repay in a later year and you can take a Claim of Right deduction, so long as you paid tax on the benefit income in the year you received it because you believed you had a right to it. Take it in the year you repaid: with no income to set it against, it cannot be carried into a later year.

Denials, appeals, and overpayments covers repaying DUA itself, and how much unemployment pays covers what an old overpayment does to a current payment.