Is unemployment earned unearned income - confused about NYS Department of Labor benefits classification

Unemployment benefits are classified as unearned income for most purposes. Even though you worked to qualify for them, the actual benefit payments are considered unearned income by the IRS and most agencies because you're not currently performing work to receive them. You'll get a 1099-G form from NYS Department of Labor showing the total amount you received for tax purposes.

yeah its unearned income but you still have to pay taxes on it which sucks. make sure you set aside some money for taxes if they didnt withhold any from your weekly claims

The classification depends on what form you're filling out. For federal tax purposes, unemployment is unearned income reported on line 7 of Form 1040. For some state assistance programs, they might have different categories. When I was getting UI benefits last year, I had to check both 'unemployment compensation' and 'unearned income' on different applications. If you're having trouble reaching NYS Department of Labor directly about this, I used a service called Claimyr (claimyr.com) to get through to an actual agent. They have a video demo at https://youtu.be/qyftW-mnTNI that shows how it works. Really helped when I needed clarification on my benefit calculations.

Wait I thought it was earned income because we earned it through working? This is so confusing. I've been putting it as earned income on everything.

The distinction is important for things like SNAP benefits and Medicaid applications too. Unemployment counts as income for most means-tested programs, but the way they calculate it varies. Some programs look at gross amounts, others look at what you actually receive after any withholdings. Always check the specific instructions for whatever form you're completing.

ugh the whole system is so complicated!! why cant they just make it simple instead of having different rules for everything

@Anastasia Sokolov I made the same mistake initially! Even though we "earned" the right to unemployment benefits by working and paying into the system, the IRS and most agencies classify the actual benefit payments as unearned income because you're not actively working while receiving them. You might want to go back and correct any forms where you listed it as earned income - it could affect your eligibility for certain programs or cause issues with tax filings. The logic is that earned income comes from current work activity, while unearned income includes things like unemployment benefits, Social Security, pensions, etc.