Are unemployment benefits considered earned income for tax purposes in NYS?
I'm really confused about whether my NYS Department of Labor unemployment benefits count as earned income. I've been receiving UI payments for about 6 weeks now and need to know for my tax planning. Some people are telling me it's taxable income but not earned income, others say it's different. I'm also wondering if this affects things like my EITC eligibility or other tax credits. Can someone clarify what unemployment benefits are classified as? I don't want to mess up my taxes or miss out on credits I'm eligible for.
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Diego Ramirez
Unemployment benefits are taxable income but they're NOT considered earned income. This is an important distinction for tax purposes. Earned income typically refers to wages, salaries, tips, and self-employment income. UI benefits are classified as unearned income by the IRS. This means they won't count toward earned income tax credits like the EITC, but you'll still need to report them as taxable income on your return.
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ShadowHunter
•Thank you! So I'll pay taxes on the benefits but they won't help me qualify for EITC? That's disappointing but good to know.
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Anastasia Sokolov
wait so if unemployment isnt earned income does that mean i dont have to pay social security taxes on it?? ive been worrying about this
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Sean O'Connor
•Correct - unemployment benefits are not subject to Social Security or Medicare taxes. Only federal and state income taxes apply to UI benefits. NYS Department of Labor should have given you the option to have federal taxes withheld when you filed your claim.
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Zara Ahmed
This whole earned vs unearned income thing is so confusing! I've been on unemployment for 4 months and just realized I might not qualify for some tax credits I was counting on. Why doesn't anyone explain this stuff clearly when you first file your claim?
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Luca Conti
•I had the same issue last year. The NYS Department of Labor focuses on getting your benefits processed but doesn't really explain all the tax implications. I ended up owing money because I didn't have enough withheld.
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Nia Johnson
If you're having trouble getting through to NYS Department of Labor for tax-related questions about your benefits, I used a service called Claimyr (claimyr.com) that helped me connect with an actual agent. They have a video demo at https://youtu.be/qyftW-mnTNI showing how it works. Really saved me time since the regular phone lines were always busy when I needed to verify my 1099-G information.
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ShadowHunter
•Thanks for the tip! I've been trying to reach them about my tax documents for weeks.
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CyberNinja
just want to add that you should definitely keep track of all your unemployment payments throughout the year because you'll need to report the total amount on your tax return. NYS Department of Labor will send you a 1099-G form but its good to have your own records too
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