If you are currently unemployed and receiving Unemployment Insurance, it’s important to remember that just as when you were employed, this money is considered income and taxed by both the Federal Government and the State of South Carolina. However these taxes are not automatically taken out, which can leave you with a scary tax bill at the end of the year.

Even knowing this, it is probably very tempting at the moment to not put money aside from each UI check since you’re going through a difficult time and most likely trying very hard to keep food on the table and your bills paid as you try to transition as quickly as possible to a new job.

However, it is much worse to realize at the end of the year that you owe the State and the Federal Government because the money required by them wasn’t put aside to begin with. To avoid the temptation of keeping it all every week or not being sure of how much to take out, you can elect to have the money taken out of every UI check automatically, just as you were probably accustomed to when you were employed.

When you apply for your Unemployment Insurance, be sure to ask specifically that the necessary tax is withheld from each check. This will most likely be around 10 % for Federal tax and whatever additional percentage you choose to have withheld for State.

If you do not choose to do this, you should be aware that you may be required to make estimated tax payments. This would require finding the information in IRS Publication 505, Tax Withholding and Estimated Tax, or the instructions for Form 1040-ES to be sure of what is necessary in your case.

At the end of the year, you will be sent a Form 1099-G showing the benefits received during the year, as well as any tax that you have chosen to have withheld. This will of course also be sent to the State and Government, at which point, if you have had enough withheld, you will not be owing any money. That’s certainly to be preferred over worrying about finding more money quickly just as you are back on your feet and moving forward in the work force, going to school, or still working hard to find employment.

So think seriously about electing to have Individual Income tax withheld each week from your Unemployment check in order to avoid problems at the end of the year.