What to Do With Unemployment When You Get a Job

Securing a new job after unemployment involves a transition from receiving benefits. This guide clarifies the necessary steps and considerations as you move off unemployment and into your new employment. Understanding these processes ensures a smooth financial and administrative shift, helping you focus on your new role.

Reporting New Employment and Stopping Benefits

When you begin a new job, promptly inform your state’s unemployment agency to prevent future issues. Most state unemployment agencies provide multiple methods for reporting new employment, often including online portals, telephone hotlines, or specific forms that can be mailed. Timely and accurate reporting of your official start date and any wages earned is crucial.

Upon starting full-time work, you are no longer eligible for unemployment benefits. Stop certifying for weekly benefits as soon as you begin your new role, rather than waiting for your first paycheck. Failing to report your earnings or continuing to claim benefits once employed can lead to overpayments that you will be required to repay. If your new job is part-time, you may still qualify for reduced benefits, but you must accurately report all hours worked and gross wages earned for each week, regardless of when payment is received. State agencies verify reported earnings with employer information, so accurate and timely reporting is essential.

Understanding Your Final Benefits and Overpayments

The timing of your new job’s start date influences your final unemployment benefit payment. Benefits are calculated on a weekly basis, and your eligibility for a given week ceases once you begin full-time employment, or if your earnings exceed a certain threshold for partial benefits. This means your last benefit payment might be prorated or you might not receive a payment for the week you started working, depending on your state’s specific rules and when you earned your first wages.

Unemployment overpayments occur when benefits are paid to an individual who was not eligible to receive them. Overpayments often result from delayed reporting of new employment, underreporting wages from part-time work, or errors in the initial claim or calculation by the agency. If an overpayment occurs, you will typically receive a notice from your state unemployment agency detailing the reason for the overpayment, the specific weeks affected, and the amount owed. Repayment is required, even if the overpayment was not your fault. States may recover funds through various methods, including withholding future benefits or tax refunds. You can appeal the overpayment determination if you believe it was made in error, or in some cases, request a waiver, though the process and availability of waivers vary by state.

Tax Considerations for Unemployment Income

Unemployment benefits received are considered taxable income at the federal level. Regarding state taxes, the taxability of unemployment benefits varies; some states tax these benefits, while others do not.

To assist with tax reporting, you will receive a Form 1099-G, “Certain Government Payments,” from your state unemployment agency by January 31st of the year following the one in which you received benefits. This form details the total amount of unemployment compensation paid to you in Box 1 and any federal income tax withheld in Box 4. You will use the information from Form 1099-G to accurately report your unemployment income on Schedule 1 of your federal tax return (Form 1040), in the “Additional Income” section.

You have options for managing the tax liability on unemployment income. You can choose to have federal income tax withheld from your unemployment payments at a flat rate of 10% by submitting Form W-4V, Voluntary Withholding Request, to your state unemployment office. If taxes were not withheld, or if the withholding was insufficient, you may need to make quarterly estimated tax payments to the IRS to avoid a large tax bill or potential penalties at tax time.