With many individuals receiving unemployment compensation due to the coronavirus pandemic, its important to remember that unemployment benefits are considered taxable income. Not withholding taxes now may result in a large bill come tax time. Contact your state unemployment office to complete Form W-4V to have taxes taken out now, or set aside a portion of your unemployment benefits for tax time.
Kentucky residents can adjust their withholding at kcc.ky.gov.
Indiana residents may only choose to have taxes withheld during their initial claim. If you elected not to have withholding taken out of your benefits, it is important to save a portion of your benefits each time you are paid unemployment. We recommend saving a minimum of 10% for federal taxes and another 4% for Indiana state taxes.