12 Apr In what year will my unemployment benefits be taxed?

Q. I was approved for unemployment in May 2020 for a few weeks before I started another job. I received the emails that I was approved but did not receive any of the money for those weeks of unemployment until January of 2021 when it suddenly showed up in my account. When I file my taxes for 2020, do I claim this as income for 2020 when it was approved or wait and claim it for 2021 when I actually received it?
— Back to work

A. It’s a great question.

Lots of people received back benefits from unemployment after delays in getting paid.

As a cash method taxpayer, you report income for the year in which you receive the cash, said Neil Becourtney, a certified public accountant and tax partner with CohnReznick in Holmdel.

“As you did not receive any unemployment compensation in 2020, you would not be subject to tax on this income for 2020,” he said. “Unemployment compensation is reported by the New Jersey Department of Labor on IRS Form 1099-G, “Certain Government Payments,” in Box 1.

“Presumably you were not issued a Form 1099-G for 2020, but you should expect to receive this form in January 2022 reporting unemployment compensation received in 2021,” he said.

Also note a recent retroactive law change for 2020 exempts the first $10,200 of unemployment compensation for taxpayers with gross income not exceeding $150,000 — and not including unemployment compensation — from federal taxation, Becourtney said.

There is no indication that this provision will apply for 2021, he said.

As always, New Jersey exempts from taxation all unemployment compensation, so the recent federal change has no impact on New Jersey.

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This story was originally published on April 12, 2021.

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