The IRS (I-R-S) considers unemployment benefits to be income, which means you will have to pay taxes on them. Taxable unemployment benefits include state unemployment insurance benefits; benefits paid from the Federal Unemployment Trust Fund; railroad unemployment compensation benefits, disability payments from a government program; Trade readjustment allowances under the Trade Act of 1974; benefits under the Airline Deregulation Act of 1978; and benefits under the Disaster Relief Act Amendments of 1974. The various state unemployment offices report paid benefits to the IRS with a copy furnished to the taxpayer. Should you be tempted not to report them, be advised that every year the IRS questions millions of taxpayers because there were discrepancies between what had been reported by employers, banks, brokers, and others and what showed on the individual taxpayer returns. Also, you can choose to have the federal income tax withheld from your unemployment compensation. To do this, you'll need to complete Form W-4V (W-4-V), a Voluntary Withholding Request; give it to the paying office, which will then withhold tax at toward your payment. These notes are meant to be a general guide to federal income taxes. If you need specific advice, please consult a tax advisor or call the toll-free number for Federal Tax Information and Assistance at 1-800-829-1040.