In the US, there is the provision of an unemployment benefit. This term is quite self-explanatory: It is the benefit a person gets during a period of unemployment that has happened for no fault of hers. This unemployment benefit is paid by the federal and State governments through the deductions on the unemployment insurance that is made during the term of the employee's employment, and is carried out by the employer.

Another source through which the unemployment benefit is paid is through the taxes deducted from the employer's contribution to this fund.

Now, unemployment benefits and taxes

Although given as a benefit to meet some expenses during a period of unemployment; there is a direct relationship between unemployment benefits and taxes, because these unemployment benefits are taxable. Unemployment benefit taxes are calculated as being part of the total income. Unemployment benefit is included as a source of income just as any other source such as salary, rents, shares, etc.

Some States exempt unemployment benefits taxes

It is important to note that a few States in the US exempt employees from the unemployment benefits tax altogether. Currently, these States are Alabama, Arkansas, California, Montana, New Jersey, Pennsylvania and Virginia. The States which partially exempt unemployment benefits taxes are Indiana and Wisconsin.

How are unemployment benefits taxes rates calculated?

The amount of compensation unemployed people earn is dependent on a number of factors, some of which are:

• The level of pay that was being earned during the time of employment
• The duration of employment
• The status of employment: whether as Consultant or as fulltime employee
• The level of insurance premiums
• The maximum level of unemployment benefit the particular State allows

How to fill out form and pay unemployment benefits taxes?

The form to use for filling up unemployment benefits and taxes records is the Form 1099-G. This is issued by the IRS. Box 1 is to be used for mentioning the total amount of employment benefit earned during the reporting period. Those who receive these unemployment benefits can have their State and federal unemployment benefits taxes withheld at source to avoid payment of bigger tax amounts. This has to be filled up in Box 4.