Unemployment Benefits

• Most unemployment benefits paid by the federal or state government are classified in the same way as income from employment and, thus, can be liable to taxation depending on your total income. Government agencies that make benefit payments are required to send recipients a copy of an IRS document titled Form 1099-G that details their payments. Box 1 of this form includes the total figure paid to the person for unemployment benefits. Copy this figure into in the relevant section of the tax return, namely line 19 for Form 1040, line 13 for Form 1040A and line 3 for Form 1040EZ.
  
  

Social Security Benefits: Tax Status

• The general rule is that Social Security benefits are not taxable if they are your only source of income. If you have other sources of income, Social Security benefits may be eligible for taxation. This is the case if your modified adjusted gross income, which is the combination of 50 percent of the Social Security benefits plus 100 percent of all other income, totals more than your base amount. For income received in 2010, the base amount is $32,000 if your tax status is married couple filing jointly, $0 if your tax status is married persons filing separately and you lived with your spouse during the year, and $25,000 in all other cases.
  
  

Social Security Benefits: Reporting

• If your benefits are taxable, you must use Form 1040 or 1040A for your tax return. The total of your net benefits are detailed in box 5 of Form SSA-1099, which you should receive from the Social Security Administration, usually in January. You must copy this figure to line 20a of Form 1040 or 14a of Form 1040A. You then need to use the worksheets supplied with the tax return to calculate how much of your benefits is taxable. In most cases it is 50 percent of the total. You must list the taxable amount on line 20b of Form 1040 or 14b of Form 1040A. If your benefits are not taxable you must still list the total benefits received on line 20a or 14a, but you then write -0- on line 20b or 14b. If you are using Form 1040EZ, you don't need to list your benefits at all.
  
  

Other Welfare

• Generally, other forms of welfare aren't taxable and don't need to be listed on a tax return. This exemption only applies to payments made based on need, such as a disaster relief grant, and not to payments made in return for services.