Wisconsin Unemployment

The Wisconsin Dept. of Labor wants to remind everyone that unemployment benefits are taxable income, on both state and federal income tax returns.

When collecting unemployment benefits, many people forget that they will eventually have to pay the taxman. As in most states, Wisconsin citizens have the option of having federal and state taxes withheld from unemployment benefit checks. However, a majority of those collecting unemployment benefits choose not to have taxes withheld.

What if you don’t know exactly how much your unemployment benefits were for 2006? The answer is simple. In January, the Wisconsin unemployment office mailed 1099 statements to everyone who collected unemployment benefits for 2006. The statements show the amount of benefits or unearned compensation paid. They also give the amount of any deductions to benefits, such as court ordered child support or court-ordered restitution. The state also furnishes complete information on unearned payments to the IRS and to the Wisconsin Dept. of Revenue.

If you collected unemployment compensation for any part of 2006 and you have not received a 1099 form, contact your local Wisconsin Dept. of Labor office. They will verify your current address and re-issue the 1099. You should receive the forms within 1 week. The local Wisconsin Dept. of Labor office can also issue 1099s for previous years, if you need them for your records.

The 1099 is the same form that is used by companies to report payments to independent contractors. Workers who are considered employees, rather than independent contractors, normally have taxes withheld from the paychecks. They receive annual W-2s, which detail their earnings and all deductions. Independent contractors, like those collecting unemployment benefits, don’t have taxes withheld form their payments. Instead, they must pay the tax bill when they file their income taxes. If their earnings are high enough, independent contractors must make quarterly estimated income tax payments.